There’s no business like show business, and there’s no city like New York City when it comes to getting sued. The ongoing saga of New York’s pied-à-terre tax continued this week, when attorney Randy Mastro, the former first deputy mayor under Eric Adams, filed a lawsuit last week challenging the city’s rollout of the tax. But after a judge sided with him on Monday, the city filed an appeal hours later that automatically put the ruling on hold.
Mastro filed suit on behalf of three homeowners, arguing the city “botched” the rollout after it first published a supplemental tax roll list and then sent out letters to nearly 17,000 homeowners the city’s Department of Finance considered potentially subject to the tax. While Mastro’s suit doesn’t challenge the tax itself, it challenges how the DOF is carrying it out.
“A botched rollout that didn’t involve any of the work the Mamdani administration should’ve done before sending out any of those letters,” Mastro said in an interview with NY1. He argued the city’s approach put the burden on homeowners rather than on itself. “It tried to flip the burden onto thousands and thousands of homeowners who are New York City residents, who should never have to be put through the burden and expense of having to apply for some exemption because the city didn’t do its job,” Mastro said.
The mayor and City Hall had plenty to say about Mastro, who served under current New York City Mayor Zohran Mamdani’s predecessor, Adams, and under the Trump-adjacent “America’s Mayor” Rudy Giuliani.
“Since leaving office, Mr. Mastro has already sued the city five times,” Matt Rauschenbach, a spokesperson for the mayor, told Fortune. “We disagree with the ruling, but we are confident in both the pied-à-terre surcharge and the City’s ability to implement it fairly and effectively.”
Even the young mayor made similar comments at a press conference a day before the ruling, when the lawsuit was first filed.
“There are few things more certain in New York City than death, taxes and Randy Mastro filing a lawsuit against this administration,” Mamdani said. “So we look forward to vigorously defending our city’s position in court as we have done so with the previous lawsuits that he has filed, and I’m sure with the lawsuits that he will continue to file in the months and years to come.”
“We are confident in our position. And that is a confidence coming from both the legality of the City’s actions as well as the importance of a surcharge on secondary homes worth more than $5 million, a surcharge that will help fund safer streets, that will help fund stronger schools, and it will help fund the city that New Yorkers deserve,” the mayor continued.
Mastro said he received one of the city’s notices himself despite living in Manhattan for decades and having been subject to a strict five-borough residency requirement while serving as first deputy mayor. “I got one, and everyone knows I’m a New Yorker and I’ve lived in New York City for a long, long time,” he said.
After Monday’s ruling, Mastro said it was a vindication for the homeowners he represents. “We are 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,” he said in a statement to CNN. Mastro has yet to respond to Fortune’s requests for comments.
But Mastro’s win was short-lived. The mayor’s office filed a notice of intention to appeal the ruling that same day, a filing that automatically stays the order under state law. That means the pied-à-terre rollout can continue while the appeal is pending, even though the judge’s restraining order technically still exists on paper.
The heart of the lawsuit
Mastro’s argument centers on three claims. First, he says the department was required by law to make an individualized determination for each property before mailing a notice that it might owe the surcharge, and skipped that step entirely. Second, he says the city shifted the burden onto roughly 17,000 homeowners to prove they didn’t owe the tax, rather than doing that work itself upfront. Third, he challenged the city’s decision to publish an online database listing more than 900,000 properties and owners’ names and addresses, arguing nothing in the law required or permitted it. Fortune has previously reported on the exposure that database created for homeowners, and on how underassessed many of the flagged properties turned out to be.
Staten Island Supreme Court Judge Wayne Ozzi agreed with all three points—at least temporarily. His Monday ruling ordered the city to take the database down and blocked further enforcement of the tax while the underlying case moves forward.
But hours after the initial ruling, the Mamdani administration filed an intention to appeal, thus staying the ruling and putting the temporary restraining order issued by Ozzi on hold.
“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,” Rauschenbach’s statement to Fortune continued. “The Law Department will appeal the ruling immediately which will stay the order, and the City will continue with the pied-à-terre’s implementation.”
Prior to the city’s filing of an intention to appeal, New York Governor Kathy Hochul told NY1 the lawsuit only affected the rollout and that the “law is intact.” Fortune reported that Hochul’s office was opening its own inquiry into residency fraud tied to the rollout.
The news made its way to the White House by Tuesday, when President Donald Trump, in a post on Truth Social, called the tax itself “pure amateur hour” before expressing disdain for watching the saga play out “especially [in] a place I once loved.”
“The NYC Pied-a-Terre Tax is costing New York City and State a fortune in that the money, eventually to be gotten, is very little compared to to [sic] the TAXES PAID by the tens of thousands of people who are fleeing the City, never to return. Florida, Texas, and numerous other States, are making an absolute fortune!”
The president’s post continued, saying he was “looking to see if the Federal Government has any legal right to avert this disaster, before it is too late, for the millions of people who cherish New York and want to see it thrive.” When reached for comment, the White House referred Fortune back to the president’s post.
A statute critics of the rollout call flawed
Stuart Saft, a real estate attorney who leads Holland & Knight’s New York Real Estate Practice Group, said the Department of Finance’s rollout compounded problems that were already built into the statute itself.
“Having read Randy Mastro’s motion and petition, it seems quite obvious that the Department of Finance failed to comply with the very specific instructions in the statute, and that made the rollout even more chaotic than it was going to be,” Saft said. “But you also have to keep in mind that the statute itself is very badly written, and it’s unclear how the tax is going to be calculated and paid.”
Saft said the law gave the Department of Finance a deadline to determine who owed the tax and notify them, with taxpayers then given 30 days to respond. He argued the timing of the mailing worked against owners rather than for them.
“Instead of waiting, instead of doing the research and sending out the notices so that they would arrive later, giving people the full window to respond, they rushed to get them out in the middle of July, so that people wouldn’t notice they got them and would be away, which was really wrong on their part,” Saft said. He added that many recipients were traveling in late July and early August, and said the timing meant some owners could see their 30-day response window lapse before they even opened the notice.
Saft also disputed the mayor’s original framing of who the tax would hit. “When the mayor first announced that this tax had been approved, what he said was that this tax is going to get money from billionaires who do not pay New York City and New York State taxes,” Saft said. “This isn’t the tax that’s going after billionaires who don’t pay taxes to New York. This is going after New York residents, full-time residents who file New York State and New York City tax returns and pay New York taxes.” Fortune has separately reported on how the rollout has instead surfaced cases of residency fraud running in the other direction, with some New York City residents claiming out-of-state addresses to dodge city and state taxes altogether.
Saft was equally unsparing about the underlying assessment math, which values co-ops and condominiums differently than houses. Because the city treats co-op and condo assessments as roughly a fifth of market value, he said, the tax’s $1 million threshold for those properties functions closer to $5 million in real terms, while the $5 million threshold for houses is calculated on full market value. He also objected to how the city apportions a building’s total tax liability among individual co-op shareholders, tying it to share allocation rather than unit value.
“Whoever wrote this terrible piece of legislation doesn’t understand the slightest thing about housing in New York City,” Saft said.
What the stay means for owners right now
Marisa Friedrich, director of Kaufman Rossin’s Tax Resolution and Advisory practice, said the automatic stay leaves owners in largely the same position they were in before Monday’s ruling.
“For the moment, the TRO pauses enforcement of the pied-à-terre tax and orders the City to take down the affected tax roll, but the underlying law remains valid,” Friedrich said. “While the next formal court proceeding is set for August 31, taxpayers face ongoing uncertainty as the City actively appeals to lift the temporary pause.”
However, “the TRO is a temporary pause, not a determination that the surcharge is invalid or that it will never be collected,” she said. “Owners should not assume the issue has gone away. Until the litigation is resolved, owners should not assume the surcharge will not ultimately be enforced.”
Oral arguments over whether Ozzi’s restraining order should stand are scheduled for Aug. 31.
