Why NYs pied--terre tax could leave entire co-ops on hook for massive bills: Whole building suffers

New York’s newly enacted pied-à-terre tax could leave entire co-op buildings on the hook for hefty tax bills if a wealthy second-home owner refuses to pay — sparking alarm among real estate brokers and co-op advocates who warn the measure was drafted without accounting for how co-ops actually operate.“It’s not the shareholder that suffers the consequences, it’s the entire building that suffers the consequences,” Jason Haber, co-founder of the American Real Estate Association and a Compass broker, told The Post.The tax spearheaded by Gov.Kathy Hochul and touted by Mayor Zohran Mamdani was signed into law as part of the state budget last month.

It targets luxury non-primary residences and is expected to raise hundreds of millions of dollars annually from wealthy second-home owners.But experts say the mechanics of collecting the surcharge could create major headaches for co-op boards, particularly in smaller buildings.Unlike condominiums, co-ops do not have separate tax lots for individual apartments.Instead, the entire building is assessed as a single property, with real estate taxes paid by the co-op and passed through to shareholders via monthly maintenance charges.“As regards to the pied-à-terre tax, the legislation requires the co-op to pay the surcharge in the same way that they pay their real estate taxes, and the co-op must then charge the impacted shareholder back and hope to collect the surcharge from them,” Rebecca Poole, director of membership and communication for the Council of New York Cooperatives and Condominiums, told The Post.That arrangement could leave co-op boards temporarily fronting large sums of money while they attempt to recover the surcharge from absentee owners.“It’s possible that co-ops could be out the funds while waiting for the shareholder who is subject to the surcharge to pay the charge back,” Poole said.The problem becomes especially acute in smaller buildings, where a single large apartment could trigger a ...