The contentious rollout of New York City's luxury-home surcharge, championed by Mayor Zohran Mamdani, is moving forward once again, at least for the present. A New York appeals court on Thursday removed a prior impediment, allowing the city to resume its implementation efforts.
Judge Philip Hom temporarily suspended the order that had prevented the city from advancing with the surcharge. This decision permits the process to restart while the underlying legal dispute remains ongoing.
The homeowners' legal representative, Mastro, voiced strong criticism, stating, "It is a shame that the City can’t own up to its own mistakes and admit that it has badly botched the rollout of this surcharge." He added that the administration is "doubling down, going to court to ensure that it can continue harassing and threatening New York City homeowners who clearly are permanent residents — something the City would know if it would only do its homework."
Mastro accused the Mamdani administration of pushing forward with what he described as "blatantly illegal" surcharge notices, numbering in the thousands.
"It is, quite frankly, outrageous that this Mayor is so desperate to further his agenda that he’s continuing to try to enforce thousands [of] surcharge ‘notices’ that are blatantly illegal," Mastro asserted.
He expressed confidence in the upcoming legal proceedings: "We remain confident that when we are back in court in a mere 18 days, the thousands of New York City homeowners who are now illegally burdened with the responsibility of proving they do indeed live in their own homes will finally get the permanent relief they deserve."
Homeowners are scheduled to appear in court on August 31, where they will seek a lasting resolution from the original judge presiding over the case.
Appellate Court's Decision
The appellate court's directive followed a sharp disagreement regarding whether the city's decision to appeal automatically halted Judge Wayne Ozzi’s entire prior order. In an August 11 communication to Judge Ozzi, Mastro contended that most of the judge’s initial restrictions remained in effect and cautioned the city against proceeding with the surcharge.
Thursday’s court order resolved that immediate ambiguity by temporarily halting Judge Ozzi’s temporary restraining order as the city’s appeal progresses.
This latest development occurred just three days after Judge Ozzi had halted the city’s implementation of the surcharge. The tax targets specific high-value properties not used as primary residences.
Judge Ozzi had directed the city to remove a contested supplemental property roll from its official website. He also temporarily barred officials from taking further action based on this roll or the notices previously dispatched to homeowners. Furthermore, he prevented the city from enforcing deadlines specified in those notices, including a September 18 deadline for filing an administrative appeal.
Homeowners' Core Arguments
The lawsuit was initiated by New York City property owners Rachel O’Brien, Carmine Morano, and Simon Hedley. Their legal challenge does not dispute the surcharge itself but rather the method by which the Mamdani administration attempted to implement it.
The plaintiffs contend that the city improperly placed the onus on New Yorkers to demonstrate their residency, instead of first determining which properties genuinely met the criteria for the surcharge. Their lawsuit also scrutinizes the city’s publication of a supplemental property roll containing data on over 900,000 homeowners. The plaintiffs claim this publication led to "mass confusion" and exposed property owners to unwarranted public scrutiny.
During a hearing on Monday, Mastro repeatedly accused the administration of insufficient preparation before launching the program. "The city screwed this up… got it wrong… stop the train and make them do it over," Mastro told the court. He emphasized, "The city is to bear the burden. They didn’t do their homework."
City's Defense and Fiscal Impact
The city swiftly countered these arguments. In appellate documents submitted on Thursday, the city requested the court to affirm that Judge Ozzi’s entire temporary restraining order was automatically stayed under state law. As an alternative, they sought a stay while their appeal proceeds and also requested permission to appeal if deemed necessary.
City attorneys argued that the act of filing a notice of appeal and an affirmation of intent to seek permission to appeal automatically triggered a stay. They further asserted that Judge Ozzi’s order disrupted the existing state of affairs and risked derailing the Department of Finance’s implementation of the surcharge within an already constrained timeframe.
According to the city’s filing, the Department of Finance had sent initial determination notices to approximately 17,000 property owners. City officials have consistently maintained that inclusion on the much larger supplemental roll did not automatically mean a property owner would ultimately be subject to the surcharge.
The city cautioned that upholding the lower court’s order could disrupt property tax bills scheduled for mailing on November 15 and potentially jeopardize the revenue expected from the surcharge. The city comptroller has projected that this tax will generate at least $500 million through fiscal year 2028, as noted in the appellate filing.
The city has also argued that the established administrative appeals process provides a straightforward avenue for homeowners to prove a property is their primary residence. Officials contend that they may not possess all necessary information to make such determinations without additional documentation from property owners.
The homeowners dispute this claim, arguing that state law mandates the city to make an individualized initial determination before sending out any notices. Plaintiff Simon Hedley, for instance, eventually received approval after providing documentation confirming his property was his primary residence. Mastro has highlighted Hedley’s experience as proof that the city could have easily made these determinations itself before issuing notices.
Mayor Mamdani's Stance
Monday's courtroom proceedings became heated as both sides debated whether the rollout caused harm to homeowners and if stopping the process would, in turn, negatively impact taxpayers and the city. Judge Ozzi ultimately sided with the homeowners at this preliminary stage, concluding that the notices caused irreparable harm and that the burden of initial determination rested with the city. He also found that the homeowners demonstrated a likelihood of success on the merits, though he stressed this was not a final ruling.
Mayor Mamdani’s administration immediately vowed to challenge the decision. The mayor reiterated his defense of the tax, stating, "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."
Before Monday’s ruling, Mamdani had also defended the tax, asserting that revenue from high-value secondary residences would help fund essential city services, including schools and public safety. He noted that only about 17,000 homeowners in a city of 8.5 million people were potentially affected and pointed to the administration’s decision to extend the deadline for homeowners to seek an exemption.
Thursday’s appellate action does not definitively resolve the legal merits of either side’s position. The appellate case is moving forward with the City of New York, Mayor Mamdani, the Department of Finance, and Finance Commissioner Richard Lee challenging the lower court’s order. The city has informed the appeals court of its readiness to proceed with its appeal on an expedited basis.
