New York City’s first attempt to collect its new pied-à-terre surcharge has produced a four-week scramble for thousands of property owners who never expected to be part of it, and a public dataset that put close to a million names and addresses into open circulation.

The Department of Finance began mailing notices in late July telling property owners they may be subject to the new non-primary residence surcharge, which applies to one- to three-family homes, condominiums and co-ops when the owner maintains a separate primary residence. The agency launched a dedicated webpage with an eligibility tool, frequently asked questions and instructions for submitting documentation. The surcharge applies to properties valued above $5 million that are not primary residences, at rates ranging from 0.8 percent to 1.3 percent of market value on a sliding scale.

The trouble started with the paperwork that accompanied it. The Department of Finance’s supplemental market value roll, published July 24, listed more than 960,000 properties — far beyond the roughly 13,000 second homes the tax was built to reach. The spreadsheet carried names, addresses and valuations for homes, condos and co-ops. Among the entries were the Flushing home of Finance Commissioner Richard Lee, whose own agency produced the list, and a Park Slope rowhouse owned by former Mayor Bill de Blasio.

Only a fraction of those listed are actually on the hook. A Finance Department spokesperson said 17,000 notices have gone out so far, against city officials’ initial estimate that the fee would apply to roughly 10,000 properties. Owners who received a letter must pay or contest it by proving the home is a primary residence, is rented to a tenant, or falls below the value threshold. That distinction was unclear for days after the spreadsheet appeared.

A tight clock and a documentation burden

Owners of one- to three-family homes and condos must prove primary residency by Aug. 21; co-op owners have until Aug. 24, according to the Finance Department’s website. Exemption applications are filed online and require uploading records such as state or federal tax returns. Jody Kriss, founder of Kriss Capital, said he expects the city will need to extend the deadline given the volume of exemptions likely to be filed, and anticipates litigation. “I was surprised the city didn’t make an effort to determine who owes the tax and who doesn’t,” Kriss said, adding that the city could have eliminated a great deal of the confusion.

For households without a standing relationship with a tax attorney, the four-week window has meant paying for one. The publicity around a list of more than 680,000 properties theoretically subject to the tax has also advertised how much property data is already public, and the value of legal privacy structures. Myles Fischer, a partner who co-leads the trusts and estates practice at Harris Beach Murtha, said middle-class and blue-collar homeowners are being pushed into sitting down with lawyers for planning advice that wealthier families secured years ago. “It’s not that you have to be a rich person to have something worth protecting,” Fischer said. “We see it from across the board.”

The unfiltered file swept in modest homes in Bayside and single-family houses in Staten Island alongside the penthouses and LLCs that drew the coverage. Fischer described homeowners on the list who consider themselves anything but wealthy: “They have a million-dollar house, but that’s probably five times their other assets.”

City Hall defends the process

Mamdani addressed the confusion at an unrelated news conference Wednesday. “I think we’re always going to do everything that we can to make sure we’re communicating clearly to New Yorkers,” he said, adding that the administration is investing the time now “to ensure that come next year, this tax is only levied on those who are non-primary residences that are worth more than $5 million.” Mamdani said the department sent informational resources as required by law so homeowners understood the tax, their options, and the appeal window if they believed it did not apply. Lee acknowledged that letters were sent using information the city had on hand, which could be dated.

Finance spokesperson Ryan Lavis said the supplemental roll was published for public inspection as state law requires, and that the agency identified potentially affected properties from that list.

Council members are not persuaded. Upper West Side Council Member Gale Brewer, who appeared on the spreadsheet herself, questioned why the city did not begin with a narrower list. “I think, in this case, it was poorly implemented,” she said, adding that she has been directing confused constituents to the Finance Department. Real estate attorney Benjamin Williams suggested the city could have supplied context rather than a bulk file. Williams said he has been inundated since the letters went out: “I wake up every day with ten more emails that people sent me between 6 and 7 a.m.”

Co-op boards face a structural problem of their own. Rebecca Poole of the Council of New York Cooperatives and Condominiums noted that entire co-op buildings are assessed as a single tax lot, unlike condos and single-family homes that receive individual bills. If one shareholder does not meet the obligation, she said, the burden shifts to the rest of the building and may require an assessment.

The onus remains on homeowners to demonstrate they are exempt. For the roughly 943,000 New Yorkers who landed on a public list but never received a letter, there is nothing to file — only a name and address now sitting in a downloadable file, and a summer spent explaining to neighbors that they do not, in fact, own a second home.

JBizNews Desk | New York

© JBizNews.com All Rights Reserved. Reproduction or distribution without written permission is prohibited.