A Staten Island judge has ordered New York City to halt and restart the rollout of a controversial tax targeting luxury second homes. The decision sides with a group of homeowners who challenged the city’s implementation process.
Issued on Tuesday, September 29, 2026, the ruling marks a major procedural setback for the administration’s efforts to collect revenue from high-end properties.
Court Rules Department of Finance Rollout Arbitrary and Capricious
Justice Wayne M. Ozzi of the State Supreme Court in Richmond County annulled the rollout of the pied-à-terre tax. He ruled that the New York City Department of Finance acted in an “arbitrary and capricious” manner.
Justice Ozzi stated that the city unfairly shifted the burden onto property owners to prove who should be subjected to the surcharge.
“Homeowners are being substantially harmed and penalized needlessly” due to the flawed execution, the judge wrote.
A group of prominent plaintiffs brought the lawsuit forward. They include Rachel O’Brien, Carmine Morano, Simon Hedley, Steven Shore, Sandra Jacobus Shore, Carla Stearns, and Kenneth Fishel.
Former first deputy mayor Randy Mastro led their legal team. He criticized City Hall for pushing forward with a faulty process.
“City Hall botched this rollout and should have just admitted the errors and fixed its own mistake, instead of wasting time and taxpayer dollars by fighting it in court,” Mastro said following the ruling.
What the Court Order Demands of New York City
The court’s specific instructions require the city to dismantle several key components of its initial tax rollout. Under Justice Ozzi’s directives, the city must:
- Take down the online public list containing nearly one million properties flagged as potentially subject to the surcharge.
- Replace the extensive online database with a targeted list displaying only properties genuinely subject to the tax.
- Cancel approximately 17,000 physical notices mailed out to property owners in July.
- Conduct more thorough research to narrow down the pool of eligible recipients.
- Issue new, individualized notices explaining property by property why the city believes the surcharge applies.
The Underlying Tax Statute Remains Law
Legal experts emphasize that Tuesday’s ruling does not invalidate or strike down the pied-à-terre tax itself. The lawsuit strictly targeted the implementation methodology of the Department of Finance rather than the legality of the tax statute.
The surcharges remain fully in effect for qualifying properties:
- Condominiums and Co-ops: Applies to units with a Department of Finance market value of $1,000,000 or greater used as second homes.
- One- to Three-Family Homes: Applies to residential properties with a market value of $5,000,000 or greater.
Mayor Zohran Mamdani and Governor Kathy Hochul originally championed the tax. They designed it to raise approximately $500 million annually to fund critical city services and programs.
Uncertainty Surrounds Deadlines and City Appeals
The ruling has plunged upcoming compliance deadlines into ambiguity. Legal analysts, such as those at Crain’s New York Business, suggest the decision effectively scraps the October 6 exemption deadline due to the cancellation of the notices. However, city officials are widely expected to seek a stay from the Appellate Division.
During a previous legal challenge on August 10, 2026, an appellate panel quickly reversed a similar restraining order within three days, allowing the city to continue its rollout.
City Hall representatives and the Corporation Counsel have defended the administration’s actions. They noted that the city was executing an initial determination framework.
Property owners who received initial notices are advised to monitor official updates closely. Those utilizing properties as primary residences, or housing family members and long-term tenants, are encouraged to continue filing exemption proofs. Meanwhile, actual second-home owners must await the revised, legally mandated notices from the Department of Finance.
