About 17,000 New York City property owners who received notices in July 2026 that they may owe the city’s new second-home surcharge had those notices ordered cancelled by a Staten Island judge on September 29, 2026. New York City has appealed, which generally pauses the order; the ruling does not strike down the tax, and there is nothing to claim.
Court Ruling · Appeal Pending · Not a Class Action
This article describes a trial-court decision that New York City has appealed. It is an individual Article 78 proceeding, not a class action: there is no class, no settlement and nothing to claim. The ruling may be stayed, changed or reversed on appeal. This page is informational and is not legal or tax advice.
What Happened?
Justice Wayne M. Ozzi of the New York State Supreme Court in Richmond County ruled on September 29, 2026 that the city’s Department of Finance (DOF) mishandled the first steps of collecting its new surcharge on high-value homes that are not an owner’s primary residence, often called the pied-à-terre or second-home tax. The court granted a petition brought by seven homeowners from Staten Island and Manhattan in O’Brien v. City of New York, Index No. 85217/2026, against the city, Mayor Zohran Mamdani, DOF and Finance Commissioner Richard Lee, all in their official capacities.The homeowners did not ask the court to throw out the tax, and it did not. Their case targeted two things DOF did in July: publishing a list of more than 900,000 properties and their owners as part of a roll it described as related to the surcharge, and mailing roughly 17,000 notices telling owners their property may be subject to the charge unless they applied for an exemption. The judge found both steps unlawful and ordered DOF to undo them. The city filed a notice of appeal the same day.
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What Is the Second-Home Surcharge?
New York State created the surcharge in its 2026 budget, amending the Tax Law and the city’s Administrative Code; the provisions took effect May 28, 2026. It applies to one-, two- and three-family homes valued above $5 million and to co-op and condo units valued above $1 million, but only when the property is not a primary residence. It applies starting with the city’s 2027 fiscal year, which began July 1, 2026. According to the decision, DOF planned to send the first surcharge bills around November 15, 2026, with payment due by January 1, 2027, and the charge on a qualifying home at the $5 million threshold is at least $40,000 a year.The law makes DOF responsible for an “initial determination” that a property is not a primary residence, based on information available to it, including tax return records it can request from the state. Only after that determination does the owner get notice and a chance to respond. The law also allows a penalty of up to 50% of the surcharge if, after a hearing, DOF finds an owner submitted materially inaccurate or misleading information negligently or in bad faith.
Why the Judge Ruled Against the City
On the published list, the decision notes it was undisputed that 98% to 99% of the properties on it are not subject to the surcharge. DOF posted it on July 24, 2026 as related to the new charge, then added disclaimers on August 1 and August 24 saying most listed owners would not owe anything. The judge accepted that property records are generally public, but found that compiling and promoting this particular list, knowing it was overwhelmingly wrong, exposed owners to harassment and unwanted attention and gave them standing to challenge it.On the mailed notices, the court found that DOF did not make the individualized determinations the law requires before sending them. DOF told the court that 2025 income tax records were not yet available and that it did not treat 2024 returns as conclusive. The judge found that refusing to use that available tax data meant many long-time residents were wrongly notified and pushed onto owners the burden of proving where they live. The decision also notes DOF declined to tell owners how it had reached each determination, and that the “exemption” application the notices described appears nowhere in the law, which simply does not apply the surcharge to primary residences.
The court concluded the notices were arbitrary and capricious, affected by errors of law, and violated recipients’ due process rights. It held that the provisions requiring owners to prove residency to DOF’s satisfaction after receiving such a notice are unenforceable as unlawful burden shifting. All four petitioner properties that had received notices were later cleared by DOF, but the judge applied the exception to mootness because the same issue affects thousands of other owners and could otherwise evade review.
The city had argued the homeowners were not meaningfully harmed, that the case was moot once their properties were cleared, and that proving a primary residence is straightforward. It also pointed to the law’s tight timeline. The judge rejected that last point, writing that time constraints do not permit shortcuts that violate due process.
What the Court Ordered
- Remove the current supplemental roll from DOF’s website. DOF may replace it with a limited roll showing only properties actually subject to the surcharge.
- Cancel every notice already mailed.
- Base any new notice on an individualized determination that uses the most recent available tax records and any other information DOF has, for this fiscal year and future ones.
- In each new notice, identify the property, the factors and records DOF relied on (including whether the property was occupied a majority of days in the year), and the value threshold that applies.
- Tell the owner how to challenge DOF’s final determination, and warn of the possible 50% penalty. The separate “exemption” process is eliminated.
What Happens Next?
The city appealed to the Appellate Division, Second Department, on September 29, 2026. Under New York’s appeal rules, an appeal by a government body generally puts the lower court’s order on hold automatically until the appellate court acts; the same thing happened to the judge’s temporary restraining order, which the Appellate Division stayed on August 13, 2026. The New York Times reported that a city spokesperson said the administration would keep implementing the surcharge while the appeal proceeds.If the ruling is upheld, DOF would have to restart the notice process before sending bills for this fiscal year. If it is reversed, the rollout continues as before. According to the decision, DOF had already extended its deadline for residency submissions to October 6, 2026, said it would notify about 1,210 owners that they no longer owe the surcharge, and planned updated letters to thousands of others. Official updates on the surcharge come from the NYC Department of Finance.
The Times also reported two newer lawsuits filed in State Supreme Court in Suffolk County in late September 2026 — one by former Commerce Secretary Wilbur Ross, Hilary Geary Ross and casino developer Steve Wynn, and another by the corporation that owns an Upper East Side co-op building and several homeowners. Unlike the Staten Island case, those suits argue the surcharge itself is unconstitutional, including that it unfairly targets people who live outside New York. Those are allegations; the city and state have said they will defend the law.
Questions
Did the court strike down New York City's second-home tax?
No. The homeowners did not challenge the surcharge law itself, and the ruling does not invalidate it. The court found that the Department of Finance implemented the law improperly, by publishing an overbroad list of owners and mailing notices without first making individualized determinations, and ordered the city to redo those steps.
Is the ruling in effect right now?
The city filed a notice of appeal to the Appellate Division, Second Department, on the day of the ruling. Under New York's appeal rules, an appeal by a government body generally puts the order on hold until the appellate court acts, and the city said it would keep implementing the surcharge in the meantime. The court's earlier temporary restraining order was stayed the same way in August.
Is this a class action, and can homeowners claim money?
No. It is an Article 78 proceeding brought by seven named homeowners seeking a declaration and an order directing the city to change how it administers the surcharge. There is no class, no settlement and nothing to claim.
What would new notices have to say if the ruling stands?
The court required any new notice to identify the property, the factors and records the Department of Finance relied on to decide it is not a primary residence, and the value threshold that applies. It must also explain how to challenge the determination and warn of the possible 50% penalty for materially inaccurate information submitted negligently or in bad faith. The separate exemption application process was eliminated.
Are there other lawsuits over the second-home tax?
Yes. According to The New York Times, two separate suits filed in late September 2026 in State Supreme Court in Suffolk County argue that the surcharge itself is unconstitutional. The city and state have said they will defend the law. Those cases are at an early stage.
Sources
- Decision and Order, O’Brien v. City of New York, Index No. 85217/2026 (Sup. Ct. Richmond Cnty. Sept. 29, 2026) (embedded below)
- Verified Article 78 Petition and Complaint (NYSCEF Doc. No. 1, filed August 7, 2026) and First Amended Petition (Doc. No. 22, filed August 18, 2026)
- Notice of Appeal and Informational Statement (NYSCEF Doc. No. 36, filed September 29, 2026); O’Brien v. City of New York, No. 2026-08175 (2d Dep’t)
- NYSCEF case search (search Richmond County index 85217/2026)
- The New York Times, Sept. 29, 2026 — city response and the Suffolk County lawsuits
