Three New York City homeowners are suing the Mamdani administration over how the city rolled out its new pied-à-terre tax, claiming warning letters and a public property roll mistakenly swept up their primary residences alongside the multi-million-dollar second homes the tax was designed to target. The lawsuit centers on Staten Island residents Rachel O'Brien and Carmine Morano and Manhattan resident Simon Hedley, who say their properties were wrongly included on the city's list.
The suit, filed as a 23-page complaint, alleges the Department of Finance's property roll publication caused mass confusion and facilitated unwanted scrutiny of homeowners' personal information, according to the complaint cited by Business Insider. The Mamdani administration sent letters to every address that could potentially be a pied-à-terre property based on property value and internal records, a step the city says was required by the Department of Finance, per the outlet's reporting. Homeowners now have until September 18 to appeal and prove they actually live in the home the city has flagged.
A Notification Net Cast Wide
The scale of the city's outreach has become central to the dispute. According to Courthouse News, the Department of Finance published a public supplemental market value roll in July listing nearly 900,000 properties potentially related to the surcharge and mailed warning letters to roughly 17,000 property owners advising them they may be subject to the tax. A department spokesperson has said the roll is a preliminary estimation rather than an exhaustive list, not a final determination of liability.
That breadth reportedly reached some unexpected addresses. Per Storylines, the warning letters were sent to primary residences of prominent New Yorkers, including former Mayor Bill de Blasio's Park Slope home and the Department of Finance Commissioner's own Flushing home — evidence, plaintiffs argue, of how automatically the records pull swept in owner-occupied properties. As of early August, only about 2,000 of the 17,000 notice recipients had completed exemption applications, while roughly 4,800 others had begun the filing process ahead of the extended deadline, the same outlet reports.
Plaintiffs Seek Emergency Removal of the List
The lawsuit asks the city to remove the property roll from the Department of Finance website as emergency relief for the named petitioners and similarly situated recipients. Randy Mastro, the plaintiffs' attorney, said thousands of people who owe nothing were confused, exposed, and put to real expense, according to Business Insider's account of the filing. Mastro also said City Hall mailed notice letters requiring New Yorkers to prove they live in their own homes and gave them only a few weeks to do so.
City Hall has responded by hiring two dozen additional staffers to handle appeals and resident questions, per the same reporting. Mayor Zohran Mamdani has said only secondary homes of non-resident New Yorkers worth more than $5 million are subject to the tax, pushing back on the notion that ordinary owner-occupants are the intended targets.
Political Ties Behind the Legal Challenge
Two of the three homeowners suing the city, Rachel O'Brien and Carmine Morano, are the wife and father of Republican New York City Councilman Frank Morano of Staten Island, according to Courthouse News. Mastro, the lead attorney on the case, is a former deputy mayor under Eric Adams and former chief of staff to Rudy Giuliani who has publicly vowed never to work for a socialist; he has launched multiple lawsuits against the Mamdani administration in 2026, including legal challenges against the mayor's rent-freeze policy and an East Village homeless intake shelter, Courthouse News reports.
Notably, the plaintiffs are not challenging the underlying legality of the state law that created the tax — only the administration's execution and notification timeline, which forces primary homeowners to actively prove exemption during the summer months, per Courthouse News's account of the filing.
How the Tax Itself Works
The pied-à-terre surcharge traces back to state legislation Governor Kathy Hochul signed in late May, authorizing New York City to levy the annual charge on non-primary residences through June 30, 2031, with initial projections targeting $500 million in annual municipal revenue, according to Courthouse News. Under Phase 1, covering tax years 2026-2027 and 2027-2028, non-primary condos and co-ops valued at $1 million or more face annual surcharges ranging from 4% to 6.5%, while non-primary single- to three-family homes valued at $5 million or more face surcharges between 0.8% and 1.3%, per Morgan Lewis's analysis of the rules. The pied-à-terre tax is set to first appear on tax bills in 2027, per Business Insider.
The Department of Finance finalized 12 pages of implementation rules for the tax in July while explicitly rejecting real estate attorneys' requests for an innocent purchaser protection, according to The Real Deal, leaving buyers of NYC luxury real estate vulnerable to retroactive tax liabilities incurred by previous owners. Starting July 1, 2028, under Phase 2, the surcharge threshold for all residential properties, including condos and co-ops, will shift to $5 million of market value under a new valuation model the Department of Finance is developing, per Holland & Knight.
Part of a Larger Budget Strategy
Mamdani and Hochul originally framed the pied-à-terre tax in April as a targeted tool to help close a projected $5 billion to $7 billion city budget gap without raising broad-based municipal personal income taxes or imposing a proposed 9.5% general property tax hike, according to the city's own announcement. Hoodline previously covered the backlash to that broader property tax hike proposal, as well as Mamdani's Wall Street meetings as the fiscal fight simmered earlier this year. The lawsuit now tests whether the rollout of that alternative — meant to spare most residents from broader tax hikes — can survive scrutiny over how it identified its targets.
