The Real Estate Board of New York to The City Council Committees on Governmental Operations, State and Federal Legislation, and Finance regarding Implementation of the[...]

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The Real Estate Board of New York (REBNY) is the City's leading real estate trade association representing commercial, residential, and institutional property owners, builders, managers, investors, brokers, salespeople, and other organizations and individuals active in New York City real estate. We thank the City Council for holding this oversight hearing on the implementation of the Pied-à-Terre Tax, also known as the second home annual tax. While REBNY opposes the underlying policy, our testimony today focuses on implementation of the new tax rather than the policy itself. The law is in effect, and the immediate priority must be to ensure that the surcharge is administered fairly, transparently, and does not inadvertently penalize primary resident New Yorkers, cooperative corporations, condominium boards, managing agents, or good-faith purchasers.

REBNY appreciates the Department of Finance's effort to promptly create an administrative framework for a complex new surcharge, and the adopted rules do provide important guidance on determinations, appeals, audits, and enforcement. Yet, core questions remain such as: Are the right properties being identified? Are the right people receiving notice? Can owners understand why they were included? Can they realistically prove primary residence status? Can cooperative corporations and managing agents administer the surcharge without exposing unwary shareholders to liens, penalties, or reserve fund losses? Can good-faith purchasers close without inheriting liabilities they did not create? How will DOF structure the Phase 2 valuation rules, and will they disclose how those decisions are made? Will the Tax Commission be prepared to respond to an influx of challenges?

The last few weeks have shown that more careful thought and time are needed if this law is to be fairly implemented.

The first-year implementation Timeline is Compressed and Operationally Unrealistic

Implementing the tax's first-year timeline is a central challenge. The Second-Home Annual Tax took effect July 1, 2026, and is scheduled to sunset June 30, 2031, unless extended. DOF adopted final rules on July 10, 2026, and Tax Commission materials followed on July 15, 2026. DOF was scheduled to publish the initial affected-property addendum on July 25, 2026, with notices due by August 30, 2026. The exemption application deadline was then extended to September 18, 2026, for owners who received notices.

For many individual taxpayers, this is a difficult timeline to adhere to in the middle of summer. For cooperative corporations, condominium boards, managing agents, tax representatives, and counsel, the timeline is not merely difficult; it is structurally incompatible with how buildings operate. REBNY member feedback shows that this leaves no meaningful time for homeowners, cooperative corporations, and their managing agents to review corrected reports, determine unit-level obligations, communicate with shareholders, collect funds, address disputes, and remit payment. The co-op collection chain requires the corporation to receive the final roll, match each affected unit to the correct shareholder by cross-referencing the stock ledger, generate and deliver individual bills, collect payment, and remit to satisfy the building's aggregate property tax account. That process requires a minimum of 60 to 90 days under ideal conditions.

Further, DOF must explain how it expects cooperative corporations to comply with a January 2027 payment obligation when final corrected information is not available until December 31, 2026. At a minimum, DOF should support an administrative extension of the co-op payment deadline. DOF should be required to commit to a date certain for the final corrected report that is early enough to allow a realistic billing cycle, and the co-op payment deadline should be extended administratively to no earlier than July 1, 2027. Condominiums, which are billed directly by DOF, do not require the same extension but would benefit from an extended payment deadline of April 1, 2027 to ensure primary residents are not inadvertently subject to the tax.

Notice Accuracy and Data Transparency Must be Improved Immediately

An owner's ability to challenge a surcharge determination depends on receiving timely and accurate notice, and that the rules should clarify where notices will be sent, who receives them, and how notices will operate in condominium and cooperative ownership structures. Unfortunately, DOF rejected public comments that requested that the agency provide taxpayers with an explanation of how they determined the taxpayer to be subject to the tax and the amount of the tax as part of the initial determination notice. Many of the reasons for this hearing stem from the fact that as part of the initial determination DOF has not adequately explained to taxpayers the market value of the property, explain how that value was determined, state the basis for DOF's non-primary residence determination, and identify the information relied upon in making the determination.

Member feedback reports that DOF is not using current property manager or management address information, that property reports have not been sent or were sent incomplete, that multiple security pins have been issued for the same address, and that some properties or units appear to have been included or excluded inconsistently. Members also report that the supplemental assessment roll addendum contains material errors, and that buildings should not bill shareholders based solely on the supplemental assessment roll without verifying market values and share calculations. Furthermore, in cooperatives, DOF does not publicly disclose its understanding of share allocation.

DOF should publish, in a downloadable format, the unit-level data needed to verify surcharge determinations in a downloadable format as it is unclear what data is being used to calculate the surcharge. Managing agents report discrepancies between their calculations of share allocation and DOF's. DOF should also explain what share number it is using for each cooperative property, how adjustments will work, and whether corrected reports will be issued by a date certain. DOF should be required to publish the per-share value and threshold calculation for every cooperative building so that boards and managing agents can verify determinations without conducting independent calculations from incomplete data.

Documentation Standards are Rigid and Challenging for New Yorkers to Satisfy

The final implementation framework must recognize the variety of ways New Yorkers establish primary residence. REBNY's comments to the DOF explained that the proposed proof standards are too narrow, and risk excluding genuine primary residents whose tax returns, identification documents, or mailing addresses do not align with their actual occupancy. REBNY recommended that DOF expressly permit direct occupancy evidence, including majority-of-days occupancy, utility usage records, affidavits, account statements, insurance documents, letters from foreign tax authorities, student documentation, and employer letters.

The implementation materials selected by DOF in their rule-making capacity went a more rigid route, requiring documents, especially in a trust or leasehold to a primary residence tenant, that require coordination among owners, trustees, tenants, family members, boards, managing agents, counsel, and tax representatives on compressed timelines.

REBNY appreciates that final rules or implementation materials appear to have clarified certain fact patterns, including common trust structures, month-to-month leases following the first year of occupancy, and continued primary residence treatment for one year following death, continuous hospitalization, or temporary nursing home or rehabilitation stays. Those improvements demonstrate why ongoing stakeholder engagement is important. The same approach must be applied to other common situations that remain unclear, including renovations, apartment combinations, estate administration, ownership changes, and units listed or leased in good faith to primary resident tenants, as highlighted in REBNY's comments. DOF must provide clearer rules so the surcharge does not apply unfairly where a unit is intended for primary residence use but cannot be occupied for legitimate reasons.

Implementation of the Tax Poses Significant Risk to Cooperative Administration

The surcharge presents unique risks for cooperative buildings. Unlike condominiums, where the surcharge is imposed on the individual unit owner's tax bill, in cooperatives the surcharge is imposed on the entire cooperative corporation's tax bill and must then be allocated to and collected from affected shareholders. If one pied-à-terre shareholder refuses to pay, a cooperative board may face a binary choice: pay from building reserve funds, effectively requiring other shareholders to subsidize one owner's tax liability, or allow interest and lien risk to accrue against the building's tax account. That risk is especially onerous because many proprietary leases predate this surcharge and may not authorize the board to bill the surcharge as additional rent, impose interest or late fees, require escrow at transfer, or treat non-payment as a lease default.

The consequences of a single shareholder's non-payment extend far beyond that shareholder. Interest accrues at 18% per annum against the cooperative corporation's entire property tax account - not against the individual shareholder's account. If the accrued lien grows large enough or remains unpaid long enough, it may be sold as a tax lien, triggering enforcement proceedings against the entire building. Many cooperative buildings carry mortgages that contain standard default provisions triggered by the existence of unpaid tax liens. A single pied-a-terre shareholder's refusal to pay could therefore, in the worst case, threaten the financial stability of the entire building and every other shareholder's home. The Council should press DOF and the legislature to create a mechanism allowing the lien to be isolated to the non-paying shareholder's shares rather than to the entire cooperative property.

Operational uncertainty includes whether managing agents should forward preliminary notices, whether they may bill before a final determination, what liability they face if they act on supplemental roll data that is later corrected, and how refunds or duplicate payments will be handled if both an owner and managing agent pay DOF. Presently, managing agents who assist in good faith could be personally liable for errors, miscalculations, or collection failures caused by shareholder, board, owner conduct, inaccurate data, or deficiencies in proprietary leases. There is no safe harbor.

DOF should establish an explicit safe harbor protecting managing agents who act in good faith forwarding notices promptly, compiling share data accurately, and assisting in administration of the surcharge from personal liability for errors attributable to inaccurate DOF data, shareholder conduct, or deficiencies in proprietary lease language. Without such a safe harbor, managing agents face an impossible choice between taking actions the law requires and exposing themselves to liability for outcomes they cannot control.

Appeals and Review Procedures Lack Clarity

Taxpayers need a clear, understandable path to challenge incorrect determinations. The appeal period should be sufficient in length to address notice uncertainty, the seriousness of the liability, and the need to gather documentation. REBNY recommends 180 days to give owners a meaningful opportunity to receive notice, gather documents, seek professional advice, and exercise appeal rights.

There is also a need to clarify who may submit documentation or file appeals on behalf of owners, such as attorneys, accountants, trustees, executors, and other authorized representatives. This is especially important for properties held through entities, trusts, estates, or other common ownership structures. With the current notice and pin structure, only one person may submit, which places many at a disadvantage. DOF's notices include a single password enabling portal access for appeal submissions. Where a cooperative unit is owned by multiple parties, held in trust, or owned through an entity, the single-password structure creates practical barriers to coordinated representation. To address these challenges, DOF should clarify that multiple authorized representatives may access the appeal portal for the same property and that the password may be shared with licensed attorneys without constituting a waiver of any rights.

The Council must also examine the interaction between DOF appeals and Tax Commission filings. DOF and Tax Commission appeal routes are not interchangeable, and the Tax Commission instructions impose rigid filing requirements. Once a taxpayer files with the Tax Commission, the DOF portal appeal route closes permanently. This is a major procedural trap for taxpayers and representatives that should be clearly explained in every notice, FAQ, form, and guidance document.

New Owners May Be Liable for a Tax They Shouldn't Owe

One of the most urgent implementation problems involves units transferred after the January 5, 2026 taxable status due to the retroactive application of the taxable status date. The surcharge for fiscal year 2027 was determined as of January 5, 2026, which was several months before the tax was ever proposed, more than four months before the law was enacted, and more than seven months before DOF issued its first notices. A taxpayer who was non-primary resident on January 5 but sold their apartment between that date and the law's enactment closed in a transaction where the law did not yet exist, no notice had been given, and no escrow mechanism had been established. That seller received full sale proceeds and departed. A unit transferred after January 5, 2026 may therefore create building-level lien exposure for a liability attributable to a shareholder who has already left and to a present owner who is a primary resident but happened to purchase the unit after January 5, 2026.

A purchaser who certifies primary residence after closing should be able to obtain removal of the surcharge and that penalties or liabilities arising from inaccurate certifications by a prior owner do not transfer to a bona fide purchaser who was not involved in the prior submission.

DOF's response was to note in its final rules that parties may structure their transactional documents to allocate this risk. That advice is of no assistance to closings that occurred before the law existed. It is also inadequate for cooperative corporations, which have no ongoing contractual relationship with departed shareholders and no practical mechanism to compel payment from someone who no longer holds shares.

Relief must be given to good-faith purchasers and cooperative corporations from prior-owner liabilities. The Council should support legislation providing that: (1) any surcharge attributable to a non-primary shareholder's status as of a taxable status date preceding the law's enactment shall not constitute a lien enforceable against the cooperative corporation or a subsequent good-faith purchaser; and (2) such liability, if collectible at all, shall be pursued directly by DOF from the individual whose non-primary use generated it, not foisted upon innocent shareholders through the cooperative corporation.

Primary Residency Documentation Should Be Protected

The Council must also examine privacy protections for documents submitted in support of exemption applications and appeals. DOF has not stated whether information submitted to DOF to support a primary residence claim may be protected by tax secrecy statutes and whether such information is subject to FOIL requests. This will discourage some taxpayers from submitting sensitive documents and may create unnecessary disputes over proof. DOF must identify what categories of documents are protected, what may be disclosed, what redactions are permitted, and what alternatives are available where sensitive financial, family, medical, estate planning, immigration, or personal information is implicated.

DOF confirmed in its final rules that information submitted to support a primary residence claim is not subject to statutory tax secrecy protections under Tax Law Section 697(e) or RPTL Section 467-a(4). This means that trust agreements, estate documents, immigration records, medical records submitted in connection with death or hospitalization exemptions, and other sensitive personal information provided to DOF in an appeal may be subject to FOIL requests. This will deter some genuine primary residents from submitting documentation necessary to protect their exemption. The Council should ask DOF to enumerate what categories of documents are protected, what redactions are permitted, and what alternatives are available where sensitive information would otherwise be required.

Phase 2 Valuation Must Not Proceed Without Stakeholder Engagement

Phase 2 begins on July 1, 2028 and moves all covered property types to a unified $5 million threshold based on a comparable-sales valuation methodology. There is no explanation as to how DOF will determine values for condominium and cooperative units under this methodology. DOF has yet to explain to owners, shareholders, boards, and market participants with any understanding as to how Phase 2 values will be determined before values are assigned.

DOF declined to address Phase 2 methodology in its final rules, characterizing it as premature. REBNY disagrees. Phase 2 requires DOF to build an entirely new comparable-sales valuation system for individual cooperative and condominium units. The first Phase 2 notices must go out by February 15, 2028, 18 months from now. DOF must collect data, develop, test, and operationalize a unit-level comparable-sales methodology, establish protest procedures for Phase 2 valuations, , all before that deadline. REBNY has requested that DOF publish a Phase 2 methodology description, timeline, and sample calculations by July 1, 2027. The Council should support that request and establish a legislative requirement that DOF engage in stakeholder consultation before Phase 2 methodology is finalized.

REBNY looks forward to working with the Council, DOF, the Tax Commission, cooperative and condominium stakeholders, and State partners to ensure that implementation is fair, transparent, workable, and protective of New Yorkers who are not the intended targets of the surcharge.

Thank you for the opportunity to provide testimony.

CONTACT:

Basha Gerhards
Executive Vice President, Public Policy
Real Estate Board of New York
[email protected]

Zachary Steinberg
Executive Vice President, External Relations & Advocacy
Real Estate Board of New York
[email protected]