Co-ops, trusts and liens: The pied-à-terre tax’s next phase

Andrew B. Freedland, co-chair of Herrick's Condominium and Cooperative Practice and Tax partner Mark A. Limardo, spoke with Inman about the upcoming notice deadline for New York City's pied-à-terre tax, and what questions property owners are likely to have once notifications are issued and implementation begins.

The article highlighted that "the New York City’s Department of Finance will notify owners by August 30, 2026, on whether their property is subject to the new pied-à-terre tax, an annual surcharge on non-primary residences that took effect July 1, 2026."

But according to Andrew and Mark the surcharge’s structure creates exposure well beyond that notice — in co-op collections disputes, retroactive audits and standard estate-planning trusts that were never built with this tax in mind.

Unlike a traditional property tax, which is issued, paid and closed for the year, the pied-à-terre tax ties eligibility to how a property is used, not just its assessed value, Mark said. That distinction gives the Department of Finance six years to audit a primary-residence claim after the fact.

"The city has six years to come in and audit," Mark said. "It doesn’t matter if the property has changed hands."

If the department later determines a property didn’t qualify as a primary residence for a given tax year, the statute appears to allow a lien for that unpaid surcharge to attach to the property regardless of who owns it at the time, Mark said. A buyer who closes without knowing a previous owner’s primary-residence claim is under audit could inherit that lien years later.

Andrew, who represents co-op and condo boards, raised the same scenario independently. If an owner isn’t billed for the surcharge and later sells, and the city subsequently determines the prior owner should have paid it, the new owner could be the one facing the bill, he said.

For condo owners, the surcharge is simple: It’s added directly to the unit’s tax bill. Co-ops are more complicated, Andrew said, because a co-op is a single tax lot. The city bills the surcharge to the building as a whole, and the co-op is then responsible for collecting it from the individual shareholder.

Mark predicted purchase contracts for higher-end New York City properties will start to resemble the kind used in company acquisitions, with sellers providing representations on a property’s primary-residence status and buyers negotiating indemnification tied to the six-year audit window.

"You’re going to want a rep from the seller on what the state of play is on the pied-à-terre tax," Mark said.

He also expects the standard order of financial disclosure in a deal to flip.

"The tax return flow is going to be reversed,” Limardo said. “You’re going to see buyers saying to sellers, ‘I want to see your tax return because I want to see if you listed this as your permanent residence.'"

That documentation question isn’t limited to pied-à-terre tax cases. The article quoted The New York Times, which reported that residency evidence — including the address listed on state and federal tax returns, driver’s license and voter registration, and even where a car is registered — can support a primary-residence claim in a separate context: Capital gains exclusions on the sale of a primary home. In that article, The Times quoted Louis Tuchman, chair of the Tax Department, "The stakes are high enough to take as many steps as you can."

Read the full article in Inman here. Access may require a subscription.