A group of New York City homeowners filed a lawsuit on Friday arguing that the city had mishandled the rollout of a contentious new tax on the second homes of wealthy out-of-towners.
The lawsuit claims that officials did not sufficiently narrow the pool of properties that might be taxed before publishing a data set on the Department of Finance’s website listing homes that “may be subject to the charge.” Nearly one million properties were included.
The lawsuit also criticizes a decision to send letters to the owners of roughly 17,000 properties informing them that they might be taxed and must apply for an exemption by Aug. 21. Some owners who are full-time city residents erroneously received letters, according to the lawsuit.
These moves, according to the lawsuit, sowed confusion and violated the law that created the tax, which includes language directing the city to “make an initial determination” on an annual basis that a property is a second home.
The lawsuit, filed in State Supreme Court in Staten Island, does not seek to invalidate the tax. Instead, it asks the court to force the city to take down the data set, which includes owners’ names and addresses, and to start the rollout again with a more accurate list of properties.
The law was passed this year and championed by both Mayor Zohran Mamdani and Gov. Kathy Hochul as a way to press the wealthy to contribute more.
The tax, which is levied as a surcharge on an annual property tax bill, applies to condos and co-ops that are used as second homes and have a “market value,” as determined by the Finance Department, of at least $1 million. It also applies to one-, two- and three-family homes with a “market value” of more than $5 million.
Properties are exempt if they are being rented to New Yorkers, or if they are the homes of owners’ immediate relatives.
Randy Mastro, a former deputy mayor under Mr. Mamdani’s predecessor Eric Adams and the lawyer representing the plaintiffs, said the city should have used existing records, like voter rolls, driver’s license information and state tax data, to determine who might be subject to the tax.
“They have shifted the burden to the homeowner to prove the surcharge doesn’t apply to their property and to prove that they actually live in their own homes,” said Mr. Mastro, who is a regular critic of Mr. Mamdani and has brought other lawsuits against the administration. “That’s not what the state statute permits.”
Mr. Mastro, who lives in Manhattan, said he himself had “erroneously received a notice letter.”
Matthew Rauschenbach, a spokesman for the mayor, said in a statement that City Hall’s lawyers were “prepared to vigorously defend the city against this suit.” He noted that the city had extended the deadline to apply for an exemption by four weeks, to Sept. 18.
City officials have argued that the law did in fact require them to publish the large data set, characterizing it as a tax roll that is made public each year and is meant to be a broad universe of properties that includes second homes.
“We also know that whenever government asks something new of New Yorkers, we have a responsibility to make the process clear, transparent and accessible,” Mr. Rauschenbach said. “That is why the Department of Finance has been working around the clock to answer questions, provide assistance and ensure those subject to the surcharge have the information they need.”
One problem for the city is that the method it uses to assess property values is widely seen as flawed and opaque. High-end condos and co-ops, in particular, are often undervalued, as are town homes in wealthy neighborhoods like Park Slope in Brooklyn.
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