Updated August 6, 2026
Potentially, but simply finding a renter and signing a lease is not enough.
A New York City property may qualify for an exemption from the new pied-à-terre tax when a legitimate tenant or subtenant uses it as their primary residence. The tenant, rental arrangement, rent, occupancy date and supporting documentation must all satisfy the applicable requirements.
Before creating, renewing or relying on a rental arrangement for this purpose, owners should consult a qualified tax attorney or tax professional. Our team can provide recommendations and introductions to experienced professionals when needed.
Can Renting Out a Pied-à-Terre Make It Exempt?
Yes, under the right circumstances.
Officially known as the Non-Primary Residence Property Surcharge, the new annual tax generally does not apply when a qualifying tenant or subtenant uses the property as their primary residence.
However, “full-time tenant” is not the legal standard. The central question is whether the New York City property is genuinely the tenant’s primary home, rather than a second residence, temporary accommodation or apartment used only part of the year.
Renting the property does not automatically create an exemption. The tenant must actually live there as their primary resident, and the rental arrangement must satisfy the City’s requirements.
What Does a Qualifying Rental Require?
The tenant must genuinely use the property as a primary residence
A signed lease is only one part of the analysis.
The tenant must actually treat the property as their principal home and be able to document that use. A tenant who primarily lives elsewhere and uses the New York City apartment as another pied-à-terre would not ordinarily satisfy the exemption.
The tenant must be an individual
A tenant or subtenant must be a natural person to establish primary residence.
An LLC, corporation, trust or other business entity cannot establish primary residency simply by being named as the tenant on the lease.
The rental must be a genuine arm’s length transaction
The arrangement must be entered into in good faith and for valuable consideration reflecting the property’s fair market rental value.
The City defines an arm’s length transaction as one between informed and willing parties, neither of whom is under compulsion to participate. The circumstances also cannot suggest a reasonable possibility that the lease or sublease was created primarily to avoid the surcharge.
A nominal rent, artificial lease or tenancy that exists mainly on paper may therefore fail to qualify.
The lease term matters
The governing law is described by leading law firms as requiring a bona fide, arm’s length lease or sublease with a term of at least one year.
A seasonal, short term or temporary rental should not be assumed to qualify.
Photo courtesy of Michelin Guide
Can a Month to Month Tenant Qualify?
This area requires particular care.
The Department of Finance’s final rules provide a documentation process for certain month to month tenants who do not have a current written lease. The City has also published a specific Tenant or Subtenant Affidavit for this purpose.
For a month to month tenancy, both the owner and tenant must confirm that the arrangement was entered into through an arm’s length transaction. The submission must also include at least two additional rental records.
At the same time, the statutory tenant exemption is described as requiring a bona fide lease or sublease with a term of at least one year.
Because the public guidance does not fully explain how the one year requirement applies to every month to month arrangement, owners should not assume that a newly created month to month tenancy automatically qualifies. The tenancy’s history and underlying agreement should be reviewed by qualified counsel.
Timing Matters: January 5 Generally Controls
For the surcharge imposed during the 2026–27 property tax year, primary residence status is generally determined as of January 5, 2026.
Moving a tenant into the property or signing a lease after January 5 will not ordinarily change the property’s status for the current surcharge year.
A qualifying tenancy established later may be relevant to a future property tax year, but it generally does not retroactively change the earlier taxable status date.
Owners planning to rely on a tenant exemption in a future year should review the arrangement well before the applicable January 5 date.
What Documents May Be Required?
An owner relying on the tenant exemption must generally establish two things:
The individual is a legitimate tenant or subtenant.
The property is that individual’s primary residence.
For a tenant with a current written lease, the Department of Finance generally requires:
A copy of the current lease or sublease.
One additional rental record, such as a utility bill, proof of rent payments or an unexpired renter’s insurance policy.
Acceptable evidence that the property is the tenant’s primary residence.
For a month to month tenant without a current written lease, the Department of Finance generally requires:
A completed Tenant or Subtenant Affidavit signed by the tenant and owner.
Two additional rental records.
Acceptable evidence that the property is the tenant’s primary residence.
Primary residence evidence may include the tenant’s most recently filed federal or state tax return or a driver’s license or other DMV issued identification showing the property address.
When those documents are unavailable, the City may accept a voter identification card together with other acceptable proof of primary residence.
All addresses, dates, rental payments and occupancy information should be accurate and consistent across the submitted materials.
Photo courtesy of Travel and Leisure
What Will Not Automatically Avoid the Tax?
A vacant apartment that is listed for rent
The exemption depends on an actual tenant using the home as a primary residence, not the owner’s intention to find a renter.
A tenant who uses the apartment as a second home
Paying rent and signing a lease do not establish primary residence when the tenant principally lives elsewhere.
A lease naming an LLC as the tenant
A business entity cannot establish primary residence as a tenant or subtenant.
A nominal or artificial rental arrangement
The rent must reflect the property’s fair market rental value, and the arrangement must be genuine.
A lease created primarily to avoid the surcharge
The City may reject an arrangement when the circumstances suggest a reasonable possibility that avoiding the tax was its principal purpose.
A tenant who moved in after the taxable status date
A later tenancy may affect a future property tax year, but it generally will not establish primary residence retroactively for the current year.
What Should Owners Do Now?
1. Consult a tax attorney or qualified tax professional
This should be the first step.
A professional can review whether the tenant, lease term, rental amount, occupancy history and supporting documents satisfy the exemption requirements.
Our team can provide recommendations and introductions if you need help finding an experienced professional.
2. Confirm the occupancy timeline
Determine when the tenant began using the property as their primary residence and whether they occupied it on the applicable January 5 taxable status date.
3. Review the lease and rent
Confirm that the arrangement was entered into in good faith, reflects fair market rental value and satisfies the applicable lease requirements.
4. Gather the tenant’s records
Collect the lease or affidavits, proof of rent payments, utilities or renter’s insurance, along with documents establishing the tenant’s primary residence.
5. Coordinate with the managing agent if the property is a co-op
Co-op owners should confirm that the lease or sublease complies with the building’s proprietary lease, board requirements and approval procedures.
6. Respond by September 18 if you received a notice
Owners who received a Department of Finance letter stating that their property “may be subject to” the surcharge currently have until September 18, 2026, to submit an exemption application.
Photo courtesy of Getty Image
The Bottom Line
Renting out a New York City pied-à-terre can potentially qualify the property for an exemption, but only when the rental is genuine and the tenant actually uses the home as their primary residence.
The tenant must be an individual. The rental must satisfy the City’s arm’s length standard. The rent must reflect fair market rental value. The occupancy date and supporting records must also align with the applicable rules.
A paper lease, temporary occupant, nominal rent arrangement or tenant who treats the apartment as another pied-à-terre will not necessarily protect the property from the surcharge.
Owners should have the complete arrangement reviewed by a qualified tax or legal professional before relying on the tenant exemption.
Frequently Asked Questions
1. Does any tenant qualify for the pied-à-terre tax exemption?
No. The tenant must be an individual who genuinely uses the property as their primary residence. The rental must also be a bona fide, arm’s length transaction.
2. Does the lease need to be at least one year?
The governing law is described by leading law firms as requiring a lease or sublease with a term of at least one year. Short term, seasonal and temporary rentals should not be assumed to qualify.
3. Can a month to month tenant qualify?
The Department of Finance provides an affidavit and documentation process for certain month to month tenants. However, because the statutory tenant exemption also refers to a lease term of at least one year, owners should obtain professional advice before relying on a month to month arrangement.
4. Can I sign a lease now to avoid the 2026–27 surcharge?
Generally, not if the property was not a qualifying primary residence on January 5, 2026. A new tenancy may affect a future property tax year, but it ordinarily will not change the earlier taxable status date.
5. What documents will the tenant need to provide?
The owner will generally need a current lease and one additional rental record, or affidavits and two rental records for a month to month tenancy. The tenant must also provide acceptable evidence showing that the property is their primary residence.
Sources
New York City Department of Finance
Non-Primary Residence Property Surcharge Guidance
Final Rules Relating to the Surcharge on Certain Non-Primary Residences
McDermott Will & Schulte
New York City’s Pied-à-Terre Tax Finally Takes Effect, but Questions Linger
Sullivan & Cromwell LLP
New NYC Non-Primary Residence Tax
This article is provided for general informational purposes only and does not constitute legal or tax advice. Property owners should consult qualified legal and tax professionals regarding their individual circumstances.
