New York Court Cancels All Pied-à-Terre Tax Notices

Introduction

On September 29, 2026, a New York Supreme Court judge issued an order cancelling all of New York City's 17,000 previously mailed notices regarding the pied-à-terre tax, which had informed property owners that they would be subject to the tax unless they applied for and successfully obtained an exemption. The order requires any new tax notice to be based on an individualized determination by the NYC Department of Finance regarding whether the property is subject to the tax. The order also requires the removal of an online "Supplemental Roll" that contained information about the owners of nearly 960,000 NYC properties, of which approximately 99% are not taxable.

Discussion

On May 28, 2026, Governor Kathy Hochul signed into law AB 10009, which contained an annual property tax surcharge on (i) one to three family homes with assessment market values of more than $5 million and (ii) residential condos and co-ops with assessment market values of more than $1 million. The tax, commonly known as the pied-a-terre tax, generally does not apply if the property is used as the primary residence of an individual property owner, an individual tenant, certain owners or beneficiaries of a property-owning entity or trust, or their immediate family members. See prior Fried Frank client alert.

The first tax payment will be due on January 1, 2027 for the fiscal year from July 1, 2026 through June 30, 2027. Primary residence status is measured as of January 5, 2026 for the fiscal year. The statute requires the NYC Department of Finance (DOF) to make an "initial determination" on whether a property is not a primary residence, based on information available to the DOF.

The DOF mailed notices to approximately 17,000 property owners requesting they provide to the DOF information establishing use as a primary residence. The initial due date for a response was in late August, but the due date has been extended to October 6.

Several owners who received notices filed suit in O'Brien v. New York on August 7. On September 29, Judge Wayne M. Ozzi of the New York Supreme Court in Richmond County (Staten Island) invalidated the mailed notices because the DOF "failed to do its due diligence" in making an "individualized initial determination based on information available to" the DOF for each property, which made the DOF's actions "arbitrary and capricious." The judge required the DOF to issue future notices only after the DOF has made an individualized initial determination using any and all resources and information available to it, including 2024 and 2025 New York State tax returns. The new notices must disclose what the DOF used in its initial determination of non-primary residence status.

In addition, Judge Ozzi found that the previously mailed notices had shifted the burden of proof to the property owners in a manner inconsistent with the statute and the owners' due process rights. The notices had informed property owners that they were subject to the tax unless they applied for and were granted an exemption. The order noted that the tax statute does not contain a primary residence "exemption," but instead the statute provides that all primary residences are categorically not subject to the tax in the first place. Accordingly, the order stated that future notices cannot engage in "unlawful burden shifting" by requiring a property owner to prove its qualification for an exemption.

Furthermore, on July 24, the DOF posted on its website two Microsoft Excel files, with the title "Supplemental Roll," that contained the owner name, property address, and other information for approximately 960,000 NYC properties. The vast majority of the properties on the Supplemental Roll had assessment market values below the $1 million or $5 million thresholds to be subject to the tax, including the Staten Island home of lead plaintiff Rachel O'Brien.

Judge Ozzi's order stated a concern with potential increased "exposure to harassment and other unwanted intrusions" and required the Supplemental Roll to be removed and replaced "with a limited Supplemental Roll reflecting those properties actually subject to the surcharge."

New York City plans to appeal the order. An earlier temporary restraining order issued by Judge Ozzi in the same case in early August had also invalidated the notices but was stayed on appeal. Notice recipients should monitor any resumption of the tax administration process.

The O'Brien litigation is focused on the tax's procedural implementation and does not challenge its substantive validity. Other property owners such as developer Steve Wynn and former Commerce Secretary Wilbur Ross are separately challenging the tax itself under the United States and New York constitutions.

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