The 12-Month Lease Exemption: What Qualifies
A Manhattan co-op owner who splits time between New York and Miami faces a potential $53,665 annual surcharge under NYC's new pied-à-terre tax, but could eliminate it entirely by signing a qualifying 12-month lease to a tenant who uses the unit as their primary residence.
The surcharge, effective July 1 2026, applies to non-primary NYC residences based on DOF market value. For condos and co-ops, rates are 4% on market values from $1 million to $3 million, 5.25% from $3 million to $5 million, and 6.5% above $5 million. The tax allows a full exemption if you have a qualifying 12-month, arm's-length lease to a natural-person tenant who uses the unit as their primary residence, according to NY Tax Law Article 30-C.
The lease must meet strict requirements. Term: at least 12 continuous months. Tenant: a natural person, not a corporation or LLC. Occupancy: the tenant must actually live there as their primary residence for more than half the year. Market terms: the lease must be negotiated at arm's length between independent parties, not a below-market arrangement with friends or family designed to avoid the tax.
Why Short Sublets and Airbnb Don't Work
The statute's 'term of not less than one year' requirement excludes seasonal stays, short-term sublets of a few months, and short-term rental platforms like Airbnb where stays are measured in days or weeks. DOF rules emphasize there is no partial-year relief: if primary-residence use does not exceed half of the year, the property is treated as a non-primary residence for surcharge purposes.
An owner who rotates a property between personal pied-à-terre use and short-term rentals will generally remain subject to the surcharge, unless a qualifying 12-month primary-resident lease is in place. Corporate apartments can be exempt only if the entity rents to an employee under a bona fide, arm's-length lease of at least 12 months and the employee uses it as their primary residence.
The January 5 Status Date
Non-primary status is determined as of the January 5 taxable status date preceding the fiscal year, not by how much of the year the owner spent in the unit. This means a qualifying lease must be in place by January 5 to secure the exemption for that tax year.
DOF applies the lease exemption only if the primary-residence and lease conditions are met for at least 12 continuous months. The agency may reject leases entered into mainly to avoid the surcharge, according to DOF interpretive policies.
The Stakes: Who's Exposed
Conquest's analysis of DOF's July 2026 Supplemental Market Value Roll shows roughly 17,000 Manhattan condos and co-ops would owe the surcharge if they are non-primary residences. Most are primary residences and owe nothing. In Manhattan, the median surcharge for condos and co-ops above the threshold would be $53,665.
The exemption application deadline is October 6 2026 for owners who received DOF 'You may be subject to...' notices. First payment is due January 1 2027. Owners get 30 days from a notice's transmission date to appeal.
Phase 2 begins July 1 2028, when condos and co-ops will be revalued on comparable sales toward the house schedule of 0.8% to 1.3% rates. The current law sunsets June 30 2031.
Use our free DOF market-value checker to see if your property falls above the $1 million threshold and calculate your potential exposure.
Frequently asked questions
Does a 12-month lease exempt my apartment from the pied-à-terre tax?
Yes, you can get a full exemption if you have a qualifying 12-month, arm's-length lease to a natural person who uses the unit as their primary residence. The lease must be at least 12 continuous months, negotiated at market terms between independent parties, and the tenant must actually live there as their primary residence for more than half the year.
Can I use Airbnb or short-term rentals to avoid the pied-à-terre tax?
No, short-term rentals like Airbnb do not qualify for the exemption because the law requires a lease term of at least one year. Seasonal stays, short-term sublets of a few months, and short-term rental platforms where stays are measured in days or weeks are excluded from the exemption.
When does my lease need to be in place to get the tax exemption?
Your qualifying lease must be in place by January 5 to secure the exemption for that tax year, since non-primary status is determined as of the January 5 taxable status date. The DOF applies the lease exemption only if the primary-residence and lease conditions are met for at least 12 continuous months.