New York City Mayor Zohran Mamdani’s push to “tax the rich” ran into a legal roadblock Monday, when a judge temporarily halted the rollout of his controversial pied-a-terre tax on luxury second homes.
Staten Island Supreme Court Justice Wayne Ozzi issued a temporary restraining order that blocks the city from moving forward with the levy until an August 31 hearing in a lawsuit brought by three unhappy homeowners.
In his ruling, Ozzi also criticized the Mamdani administration’s decision to publish a list of property owners who could potentially be subject to the tax. Many of those homeowners had already received notices warning they could be liable unless they applied for an exemption.
“No law permitted or required the City to publish such a list of the names, addresses and property values of more than 900,000 New York City homeowners, or to publicize that list through an irregular, mid-year publication,” Ozzi wrote in the decision, obtained by AMNY.
The judgment, he wrote, “annuls and vacates” the city’s mailed notices, along with “any determination that such mailed notices constitute proper notice under tax law.”
Ozzi said city officials should have first made an “individualized statutorily-required initial determination” before sending warnings to homeowners, rather than shifting the burden onto property owners to prove they were exempt.
The order bars the city from taking further action on the 17,000 notices issued by the Department of Finance, which told recipients they could face a five-figure tax bill if they did not seek an exemption.
The ruling delivers an early win for Rachel O’Brien, Carmine Morano and Simon Hedley, the homeowners who filed suit Friday challenging the rollout of the disputed tax, according to the New York Post.
New York City Mayor Zohran Mamdani’s plans to ‘tax the rich’ hit a snag on Monday, when a judge blocked the rollout of his controversial pied-a-terre levy
The tax applies to three-family homes worth at least $5 million and condos and co-ops valued at $1 million or more that are not primary residences
The homeowners claimed they either erroneously received notices that they would face the tax despite living in their longtime primary residences or were included in the city’s published tax roll of property owners who would pay the tax.
City officials originally published a database of more than 900,000 potentially impacted homeowners last month with Mamdani telling wealthy New Yorkers to ‘check your mailbox when you’re back in the five boroughs because you’ve got mail.’
However, the vast majority of the listed properties did not meet the city’s criteria of unoccupied, non-primary homes.
Amid the ensuing uproar, city officials sent out a revised 17,000 notices to homeowners.
Residents suing the city contend that Mamdani’s tax rollout ’caused mass confusion’ because city officials ignored state-provided data about who would be eligible for the tax under the new law.
They argue city officials put the onus on longtime New Yorkers, many of whom were left scrambling to prove they lived at their residences ahead of a quick one-month deadline.
Yet the lawsuit does not address legal concerns with the tax itself, which applies to three-family homes worth at least $5 million and condos and co-ops valued at $1 million or more that are not primary residences.
The tax progressively increases as the value of the home increases, topping out at 1.3 percent of a single family’s home value when it’s worth over $25 million and 6.5 percent of a condo or co-op’s value when it’s worth over $5 million.
It is projected to raise roughly $500 million for the city annually.
Three homeowners represented by former Deputy Mayor Randy Mastro (pictured) filed a lawsuit on Friday claiming the rollout of the new tax ’caused mass confusion’
Just hours before the judge issued his ruling, city officials countered that the Department of Finance had already received ‘3,801 submissions challenging the department’s initial determination as to primary residence.’
It also noted that Hedley, one of the plaintiffs who is a self-declared Mamdani supporter, had his appeal approved already after he uploaded a tax return on Saturday proving his Manhattan home is his primary residence.
Lawyers for the city then went on to argue that the plaintiffs’ requested restraining order would block them from taking action on the already filed and in-progress appeals, which could total nearly 8,000.
‘Enjoining the Department from taking any action on these appeals would deprive many property owners of receiving prompt responses to their appeals,’ the filing argued.
‘Issuing a temporary restraining order that pauses the September 18 deadline may lull taxpayers into delaying their filings and that, in turn, may mean that those delayed administrative appeals cannot be processed in time to be reflected in the November 15 bills.’
The lawyers also argued that the suing homeowners ‘have to raised any legally actionable claim or identified any irreparable injury’ that would necessitate the city from removing its rent roll from the city’s website.
But under Ozzi’s ruling, the city must take down the online list and city officials cannot take any action based on the list or on the mailed notices until the hearing at the end of the month.
New York City Councilman Frank Morano praised the judge’s ruling on Monday
He noted in a post on Facebook that his father and wife were among the plaintiffs in the suit
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Hedley told the Post in the aftermath he was pleased with the outcome, as he acknowledged that the city got back to him quickly after he uploaded his tax documents.
‘I understand it’s still the end of the month, so there’s not a whole lot of time,’ he said of the August 31 court hearing. ‘Hopefully, they can take the opportunity to roll things out a bit more smoothly.’
Lawyer Randy Mastro, who filed the suit after serving as a deputy mayor under former Mayor Eric Adams, also said he was, ‘very gratified by the judge’s decision, which has vindicated the rights of hundreds of thousands of New York City homeowners who were subjected to a process they never should have been a part of in the first place.’
New York City Councilman Frank Morano further praised the ruling, noting that his wife, Rachel, and his father, Carmine, were among the plaintiffs.
‘I’m proud we helped shine a light on this and I’m especially proud of Rachel and my dad for being willing to stand up and challenge City Hall,’ he posted on Facebook Monday night.
‘But this fight is far from over. Today’s ruling is temporary while the case continues, and we fully expect the City to keep fighting.’
‘That’s fine with me,’ the councilmember continued.
‘Government has to follow the law, too, and I look forward to seeing today’s decision upheld as this case moves forward, including on appeal if necessary. Today, the homeowners got heard. Now we keep fighting.’
Mamdani unveiled the pied-a-terre tax while outside billionaire Ken Griffin’s Manhattan penthouse on Tax Day
His message came as the Mamdani administration also vowed to fight the ruling and get the restraining order lifted.
‘We disagree with today’s ruling, but we are confident in both the pied-a-terre surcharge and the city’s ability to implement it fairly and effectively,’ Mamdani spokesman Matt Rauschenbach said in a statement.
‘This surcharge asks those who own second homes valued at $5 million or more to contribute their fair share to the city they benefit from,’ he argued.
‘The Law Department will appeal the ruling immediately, which will stay the order, and the city will continue with the pied-a-terre’s implementation.’
