Key Points

  • The Appellate Division, Second Department, reversed a Richmond County judgment that had granted injunctive and declaratory relief against the Department of Finance's administration of the second-home surcharge, and dismissed the case.
  • The court held the homeowners' claims were not moot and were not barred by the exclusive-remedy provisions of Tax Law § 1355(b) and Administrative Code § 11-3206(h), which apply only after a Tax Commission final determination.
  • The court held the homeowners lacked standing because listing on the supplemental roll, receipt of an initial determination notice, generalized confusion, privacy concerns, and exemption-compliance costs are not concrete injuries-in-fact.
  • The court did not decide whether the department violated 19 RCNY 62-06(a)(2)(i) by not relying solely on 2024 income tax data, holding that the homeowners in any event showed no harm different from that of the public at large.
  • The lack of standing defeated both the CPLR article 78 claims and the request for declaratory relief under CPLR 3001.

A New York appeals court on Nov. 4 reversed a judgment that had granted homeowners certain injunctive and declaratory relief in their challenge to New York City's initial implementation of a new tax surcharge on second homes, holding that the homeowners who sued had suffered no injury that entitled them to bring the case.

The Appellate Division, Second Department, ruled unanimously in an unsigned decision and order joined by Justice Mark C. Dillon, presiding, and Justices Francesca E. Connolly, Deborah A. Dowling and Phillip Hom. The panel overturned a Sept. 29 judgment by Justice Wayne M. Ozzi of Supreme Court, Richmond County, that had granted the homeowners certain injunctive and declaratory relief. It denied the amended petition and dismissed the case, with costs.

The ruling turned on standing, a threshold determination that requires a party to show an injury-in-fact that falls within the zone of interests of the statute under which the government acted. The panel held that appearing on the department's published list, receiving a notice questioning a home's status as a primary residence, and spending time and money to contest it were not such harms. The court did not reach the homeowners' claim that the department acted arbitrarily in choosing which owners to notify.

In May 2026, state lawmakers created a surcharge on city properties "held as second homes." The surcharge applies to one-, two- and three-family homes, cooperative units and condominium units that are not primary residences and that meet certain market-value thresholds. From July 2026 to July 2028, those thresholds are $5 million for covered class one properties and $1 million for co-op and condo units.

The law requires the department to publish a supplemental roll of covered properties' market values and, each year, to notify owners of properties it initially concludes are not primary residences, who may then submit proof of residence before a final determination. In July 2026 the department posted the roll online and sent initial determination notices to about 17,000 owners.

The homeowners sued shortly afterward in a hybrid case that combined a proceeding under CPLR article 78 with an action for declaratory and injunctive relief. They named the city, the department, Mayor Zohran Kwame Mamdani and Finance Commissioner Richard Lee. Petitioners Rachel O'Brien, Carmine Morano and Simon Hedley appeared on the roll; according to the amended petition, Hedley, Steven Shore, Sandra Jacobus Shore, Carla Stearns and Kenneth Fishel received notices.

The city lost two of its threshold arguments. Although the petitioners who received notices were exempted from the surcharge after the case was filed, the panel held that the claims targeted the department's "initial procedural implementation of the surcharge law" and sought to annul all of the notices, so they "were not rendered moot by later events." The court also rejected the city's argument that the Tax Law limited challengers to review under Real Property Tax Law article 7, holding that the exclusive remedy applies "only where a final determination has been rendered by the Tax Commission of the City of New York."

Standing was a different matter. The homeowners had alleged that the roll, which listed 900,000 property owners, "caused mass confusion among homeowners, including Petitioners, and invited public scrutiny and ridicule." The panel answered that "confusion has been held to be too generalized, tenuous, and ephemeral to constitute a cognizable injury-in-fact as to confer standing." Fears of stalking and fraud raised in the homeowners' appellate brief, the court wrote, were "not supported by any witness affidavit or actual evidence."

The panel also found the privacy objection insufficient. City assessment rolls, published every year, already list each parcel's owner, assessed value and full market value, and so contain "much of the same information as the supplemental roll at the heart of this appeal," the court wrote.

The court found that the notices' wording met the requirements of Tax Law § 1352(a)(2) and 19 RCNY 62-06(a)(4). Receiving one "does not qualify as an injury, in and of itself, as the notice instead serves an informational purpose," the panel held. It compared the notices to debt collection letters, which, it wrote, do not by themselves amount to an injury-in-fact.

Nor was the cost of seeking an exemption an injury. "All taxpayers incur time, effort, and costs in determining and complying with their various tax obligations," the panel wrote, adding that "the petitioners have not documented and quantified any actual costs incurred."

On the merits, the homeowners argued that the department acted arbitrarily by not relying solely on 2024 state income tax data, as they read a city rule requiring use of "the most recent income tax year for which data is sufficiently available." The city urged deference to the department's reading of the rule. The panel did not resolve that dispute, holding that the homeowners also had to show harm different from that of the public at large.

They could not, the court held, because the statute itself lets owners rebut the department's initial finding. "The State Legislature must have anticipated that the list of notice recipients would not be exact or flawless; otherwise, there would be no purpose to providing an exemption procedure at all," the panel wrote. That exemption mechanism "cannot be classified as harm, as it is a creation of the State statute itself," which the homeowners had not challenged.

The homeowners' expert, Martha E. Stark, had said the department should have used 2025 tax data. When that data became available, the department used it to revise its initial determinations and told several hundred owners that they did not owe the surcharge. The panel called the risk that confidential records submitted to the department might someday be disclosed "too tenuous and conjectural to qualify as a concrete injury." The standing defect also defeated the declaratory judgment claim.

The city was represented by Corporation Counsel Steven Banks; the homeowners were represented by Randy M. Mastro of Dechert LLP.

The reversal sets aside the injunctive and declaratory relief the trial court granted. The decision is uncorrected and subject to revision before publication in the Official Reports.