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On September 29, 2026, the New York Supreme Court, Richmond County, ruled against the New York City Department of Finance (DOF) over how it rolled out the new pied-à-terre surcharge. In O’Brien v. City of New York, the court:
- Ordered DOF to take down a “Supplemental Roll” listing more than 900,000 properties.
- Cancelled the surcharge notices DOF had mailed.
- Required DOF to make individualized primary-residence determinations using the tax data it already has.
- Eliminated DOF’s “exemption” process because it unconstitutionally shifted the burden of proof onto homeowners.
The City filed an appeal the same day and says the appeal automatically puts the ruling on hold. DOF continues to list October 6, 2026, as the deadline for exemption applications. The surcharge law itself remains in effect.
NYC Pied-à-Terre Surcharge Court Ruling: Key Takeaways
While the ruling invalidates key aspects of the DOF’s notice process, the pied-à-terre surcharge remains in effect and requires attention from affected property owners.
- Preserve your filing position. Despite the trial court’s ruling, DOF continues to administer the exemption process and presently lists October 6, 2026, as the deadline. Owners who received a notice should consider responding timely while the appeal and asserted stay remain pending.
- The tax still applies. The case challenged how DOF administered the surcharge, not the statute.
- Be careful what you send DOF. DOF has taken the position that tax returns owners submit to it are not covered by tax-secrecy protections.
- Entity- and trust-held properties present additional eligibility and documentation issues. More than half of the properties initially identified by DOF were held through trusts, LLCs, partnerships, corporations, or other entities, and the applicable primary-residence rules depend on the ownership and beneficiary structure.
- The constitutional holding is the most exposed on appeal. The rest of the decision is on firmer ground.
Background on the NYC Pied-à-Terre Surcharge
The surcharge was enacted in the 2026 New York State budget as Part HH of Chapter 59 of the Laws of 2026 (Tax Law art. 30-C; NYC Admin. Code §§ 11-3201 to 11-3208).
- What properties are covered? 1–3 family homes valued at more than $5 million, and condo and co-op units valued at $1 million or more, when the property is not a primary residence.
- When is the surcharge due? The first surcharge payment is due by January 1, 2027. The statute directs DOF to add the surcharge to the property’s statement of account, and the court noted that DOF expected to issue the applicable bills on or about November 15, 2026.
- How is residency determined? DOF must make an “initial determination” of primary residence based on the information available to it. The statute gives DOF access to state income tax records for that purpose.
In July, DOF did two things:
- It posted a roll of more than 900,000 properties, 98–99% of which are not subject to the surcharge.
- It mailed roughly 17,000 notices inviting owners to apply for an “exemption.”
DOF had 2024 income tax returns available but chose not to treat them as dispositive of residency.
Why the Court Ruled Against NYC’s Pied-à-Terre Surcharge Notice Process
- The case was not moot. DOF reversed the named petitioners’ notices after they sued. The court decided the case anyway because the issues are novel, will recur each year, and would otherwise escape review (City of New York v. Maul, 14 NY3d 499 (2010)).
- The Supplemental Roll was arbitrary and capricious. The statute calls for notice to owners who may actually owe the surcharge. Republishing nearly the entire residential tax roll went far beyond that. The court treated DOF’s later disclaimers as confirmation that the release was wrong.
- DOF failed to make individualized determinations. DOF’s own rule (19 RCNY § 62-06) directs it to use the most recent income tax return for which data is “sufficiently available,” which in July 2026 was the 2024 return. The court held that refusing to rely on that data conflicted with both the statute and DOF’s own rule and was arbitrary.
- The “exemption” process shifted the burden unconstitutionally. To disprove a status DOF never established, owners had to pay professional fees, risk a 50% penalty, and give up tax-return confidentiality. Relying on Speiser v. Randall, 357 US 513 (1958), the court held that the provisions requiring owners to prove primary residence to DOF’s satisfaction violate due process and cannot be enforced.
What the Court Ordered the NYC Department of Finance to Do
The court’s decision requires DOF to make several changes to how it administers and communicates the pied-à-terre surcharge.
- The Supplemental Roll must come down. DOF may replace it with a roll listing only properties actually subject to the surcharge.
- All previously mailed notices are canceled.
- Any new notice must follow an individualized determination and must:
- Identify the property and the applicable threshold
- Explain the factors DOF considered
- Disclose the records DOF relied on
- Describe the owner’s appeal rights
- Warn of the potential 50% penalty
What’s Next for the NYC Pied-à-Terre Surcharge and Appeal
- Appeal and asserted stay. The City filed a notice of appeal with the Appellate Division, Second Department, and has taken the position that CPLR 5519(a)(1) stays enforcement of the trial court’s judgment while the appeal is pending. The precise scope of that statutory stay may be disputed, particularly with respect to portions of the judgment directing the City to take affirmative action. Unless and until a court limits the stay or DOF changes its guidance, however, DOF is continuing to administer the surcharge and continues to identify October 6, 2026, as the exemption-application deadline.
- Possible procedural issue concerning attorney-general notice. Although the petitioners stated that they were challenging the City’s administration of the surcharge rather than the validity of the underlying statute, the court held that certain statutory, Administrative Code, and regulatory provisions were unenforceable to the extent they improperly shifted the burden of proving primary residence to property owners. That aspect of the ruling could raise a question under CPLR 1012(b), which addresses notice to the attorney general when the constitutionality of a state statute is placed in issue and the state is not a party. The decision does not indicate whether such notice was given. The significance of that issue, if any, will depend on the arguments raised on appeal.
- A separate challenge to the statute. In Ross v. State of New York, Index No. 628629/2026, filed September 28, 2026, in Suffolk County Supreme Court, the plaintiffs challenge the validity of the surcharge itself. The complaint alleges, among other things, that the surcharge is an ad valorem real-property tax subject to the New York Constitution’s real-estate-tax limitation and that its treatment of non-primary residences violates federal and state constitutional protections. Those claims remain pending and have not been adjudicated. Public reporting also identifies at least one additional challenge to the statute.
What Property Owners Should Do Before the October 6 Deadline
- Preserve your rights under DOF’s currently operating process. Although the trial court ordered elimination of the existing exemption process, the City has appealed and is treating the judgment as stayed. DOF therefore continues to accept exemption applications and presently identifies October 6, 2026, as the filing deadline. Owners who received a notice should consider responding by the deadline in their most recent letter and submitting focused evidence sufficient to establish primary residence or another basis for exclusion, while avoiding unnecessary disclosure of complete tax returns or other sensitive records.
- Check your most recent letter. Confirm the deadline, property information, asserted surcharge amount, and any updated determination from DOF.
- Submit focused support. Provide the documentation needed to establish primary residence or another statutory basis for exclusion, without automatically submitting a complete tax return when narrower evidence may suffice.
- Review entity- and trust-held properties carefully. Confirm which owners, majority interest holders, immediate family members, tenants, or trust beneficiaries may establish the qualifying primary-residence use.
- Choose the appropriate review route. The DOF process and the NYC Tax Commission process may involve different procedures and consequences. Consult an advisor before selecting a forum.
- Preserve the record. Retain the notice, updated correspondence, portal security code, submitted documents, filing confirmation, and screenshots of the submission.
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