NYC Pied-à-Terre Tax Raises Concerns for Co-Op Buildings
New York’s new pied-à-terre tax could leave entire co-op buildings responsible for large tax bills if a wealthy second-home owner fails to pay, raising concerns among brokers and co-op advocates who say lawmakers overlooked how co-ops operate.
The tax, championed by Gov. Kathy Hochul and backed by Mayor Zohran Mamdani, was signed into law as part of last month’s state budget. It targets luxury non-primary residences and is expected to generate hundreds of millions of dollars annually.
Unlike condos, co-ops are taxed as a single property. The co-op pays property taxes and passes costs to shareholders through maintenance fees. Under the new law, co-ops must pay the surcharge upfront and then seek reimbursement from affected shareholders.
Rebecca Poole of the Council of New York Cooperatives and Condominiums said boards could be left covering large sums while waiting for absentee owners to repay them. The risk is especially significant in smaller buildings. In a five-unit co-op, for example, a surcharge on one large apartment could force the other shareholders to come up with substantial funds while the board attempts to collect from the owner.
Jason Haber, co-founder of the American Real Estate Association and a Compass broker, said enforcement poses another challenge because co-op apartments do not have individual tax lots. If a shareholder does not pay, a lien could potentially be placed on the entire building rather than a single unit, affecting all residents and potentially complicating apartment sales and financing.
Poole said many boards are still unsure whether the tax applies to their buildings and which shareholders may be affected. She urged boards to review their apartments and begin preparing.
Some boards are already considering restricting future pied-à-terre ownership to avoid liability.
Hochul’s office said the city will identify affected owners and notify boards, which must pass the information along. The office said co-ops already collect property taxes, the law allows direct enforcement against unit owners, and the tax applies only to a narrow class of high-value secondary residences. It added that the policy will not reduce housing options for New Yorkers.
