Pied-a-Terre Tax Update: Litigation, Notices, and Immediate Next Steps

/2 minute read

Litigation concerning New York City’s rollout of the new pied-a-terre surcharge has resulted in a pause of the pied-a-terre program and subsequent reinstatement following the City’s appeal. While the litigation remains ongoing, property owners who received pied-a-terre tax notices from the New York City Department of Finance (“DOF”) should not assume that the litigation eliminates the need to file for an exemption by the current DOF deadline of September 18, 2026.

Background

The pied-a-terre surcharge was enacted as part of New York State’s 2026-2027 budget legislation and applies to certain New York City residential properties that do not serve as a primary residence. DOF has since published guidance and began sending notices to owners of properties that may be subject to the surcharge.

Many notices appear to have been sent where City records did not allow DOF to confirm primary-residence or exemption status. This is particularly common where title is held through a trust, LLC, corporation, partnership, or other ownership structure, or where the person occupying the property is not the record owner.

What the Law Generally Does

For the 2026-2027 and 2027-2028 tax years, DOF guidance provides that the surcharge applies to one-, two-, and three-family homes valued by DOF at more than $5 million and condominium or cooperative units valued by DOF at $1 million or more.

The surcharge will generally not apply if the property is used as a primary residence by any of the following:

  • the owner of the property;
  • a tenant or subtenant;
  • an immediate family member of the owner or majority interest holder;
  • one or more individuals who collectively hold a majority interest in an entity that owns the property; or
  • the sole beneficiary or beneficiaries of a trust.

For the first two tax years in which this applies, the surcharge rate for one-, two-, and three-family homes is 0.8% for homes with a market value between $5,000,000 and $14,999,999; 1.05% for homes with a market value between $15,000,000 and $24,999,999; and 1.3% for homes with a market value of $25,000,000 or greater.

As for condominium and cooperative units, the surcharge rate for the first two tax years is 4.0% for units with a market value between $1,000,000 and $2,999,999; 5.25% for units with a market value between $3,000,000 and $4,999,999; and 6.50% for units with a market value of $5,000,000 or greater. Market value is determined by DOF and can be found on a property owner’s tax bill.

It is important to note that the pied-a-terre notice sent by DOF is not the same as a final tax bill. DOF has indicated that it sent letters where its records did not allow it to confirm primary-residence or exemption status. This is especially common where title is held through a trust or entity, where the occupant is not the record owner, or where co-op and condo abatement or tax filing data does not resolve the question.

If the property remains subject to the surcharge, DOF states that charges will appear on the property tax bill due January 1, 2027.

If you have questions about the pied-a-terre surcharge, the exemption process, or a notice received from DOF, please contact the Carter Ledyard Real Estate Department or your regular Carter Ledyard attorney.