By Patrick McCormick
Public policy in New York seeks to avoid forfeiture of leases.1 What is commonly referred to as a Yellowstone injunction is a procedural mechanism used by tenants in furtherance of that policy.2 As succinctly stated by the Court of Appeals:
A Yellowstone injunction maintains the status quo so that a commercial tenant, when confronted by a threat of termination of its lease, may protect its investment in the leasehold by obtaining a stay tolling the cure period so that upon an adverse determination on the merits the tenant may cure the default and avoid a forfeiture.3
To obtain a Yellowstone injunction, and thus toll the running of a lease cure period, the party requesting the relief needs to demonstrate:
(1) it holds a commercial lease, (2) it received from the landlord either a notice of default, a notice to cure, or a threat of termination of the lease, (3) it requested injunctive relief prior to the termination of the lease, and (4) it is prepared and maintains the ability to cure the alleged default by any means short of vacating the premises.4
As is evident from this well accepted standard, to obtain Yellowstone relief, the tenant need not meet the more stringent requirements for a preliminary injunction.5 However, despite this relaxed standard, obtaining Yellowstone relief is not always a simple matter and there are numerous cases denying relief, most of which focus on the timeliness of the application or the tenant’s ability to cure the alleged default.
Timeliness of Application
As set forth above, the Court of Appeals has confirmed that an application for a Yellowstone injunction must be made prior to the termination of the lease.6 What appears to be a simple standard is not, however, so simple.
Where a tenant fails to make a timely request to toll a cure period, “a court is divested of its power to grant a Yellowstone injunction.”7 The Appellate Division, Second Department, has interpreted the timeliness element as requiring the tenant to make an application for Yellowstone relief “not only before the termination of the subject lease — whether that termination occurs as a result of the expiration of the term of the lease, or is effectuated by virtue of the landlord’s proper and valid service of a notice of termination upon the tenant after the expiration of the cure period — but must also be made prior to the expiration of the cure period set forth in the lease and the landlord’s notice to cure.”8
In Goldcrest Realty Company v. 61 Bronx River Owners, Inc.,9 the plaintiff sponsor of the subject cooperative and holder of unsold shares allocated to 15 apartments, moved by order to show cause for both a Yellowstone injunction and a preliminary injunction. The motion was made after receipt of 15 separate default/cure notices, after the expiration of the cure period and after receipt of termination notices but before the date set in the termination notices for the termination of the respective leases. The Court held in these circumstances that neither a Yellowstone nor preliminary injunction was available.
In reaffirming prior holdings the Court explained that once the cure period expired, the Court was powerless to revive a lease. The Court once again explained that the request for a Yellowstone injunction must be made both before the termination of the lease and before the expiration of the cure period set forth in the lease and cure notice. In so doing, the Court restated its express rejection of any prior decision “fixing a different or longer period of time in which an application for Yellowstone relief must be made.”10 The Appellate Division held that the Court below improperly granted the Yellowstone injunction “since the plaintiff did not seek Yellowstone relief within the cure period . . .” In addition, the Appellate Division also held, in agreement with the First and Third Departments, that a motion for a preliminary injunction “must also be made prior to the expiration of the cure period.”
Disagreeing with the Second Department, the Appellate Division, First Department, takes a more forgiving view.11 In a case involving a commercial lease where the lease provided for a specific time period within which to cure any alleged default, but also provided for an unspecified longer cure period for those defaults that could not be cured within the specified time period, where the tenant took significant steps to cure the alleged default, but could not cure the default within the specified time period, the Court reversed an order denying an application for a Yellowstone injunction even though the application was made after the expiration of the initial cure period and after service of a notice of termination. Emphasizing that the specific lease in question simply required the tenant to commence diligent efforts to cure the defaults within the initial cure period, the Court explained that because the lease at issue provided for a scenario where the tenant might not be able to cure an alleged default within the specific cure period, the landlord should be bound to the specific terms of its lease agreement which provided for an additional unspecified cure period.12
Delay in making the application can also prove harmful even if made within the applicable cure period. In a recent case13 the plaintiff commercial tenant sought a Yellowstone injunction one day before the cure period was to expire. A temporary restraining order was issued by the Court ultimately denied the motion holding that the tenant failed to demonstrate it was ready and able to cure the defaults alleged (failure to pay rent and late fees and procure the required amount of liability insurance). As there was one day left in the cure period when the motion was decided, the lease terminated the next day.
After expiration of the lease, tenant moved to renew and reargue, conceding its initial motion failed to address its ability to cure the claimed insurance default. The Court below granted the motion to renew/reargue and granted the Yellowstone injunction. The case eventually went to trial and tenant was found to have breached the insurance provision but the trial judge determined that the Yellowstone injunction had been granted nunc pro tuncas of the date of the original Yellowstone application and that therefore tenant still had one day to cure the default.
The Appellate Division, First Department, held that the trial Court “improperly concluded that Tenant still had the right to cure its breach.”14 The Court reasoned that after the initial motion for a Yellowstone injunction was denied, because the motion to renew/reargue was brought after the cure period expired, the Court did not have the power to grant Yellowstonerelief. The Appellate Division also held that, while in certain extremely limited circumstances retroactive relief was possible, those circumstances did not exist in this case and that giving retroactive effect to the Yellowstone injunction upon the motion to renew/reargue was improper.
Finally, where a lease provides for a specific time period within which to cure alleged defaults, but the landlord’s default notice grants a longer period to cure the default, an application for Yellowstone relief will be deemed timely if made before the expiration of the longer period provided in the notice.15
Willingness to Cure
Unlike the dispute regarding timeliness of an application for Yellowstone relief, the First and Second Departments agree that a tenant need not actually prove it as the ability to cure an alleged default in order to obtain relief. A tenant need only “convince the Court of his desire and ability to cure the defects by any means short of vacating the premises.”16 The Second Department has stated that the willingness to cure requirement will be demonstrated where a tenant in its motion papers indicates that it is willing to repair any defective condition found by the Court and by providing proof of the substantial efforts it already made in addressing the majority of conditions listed in the notice to cure.17
Residential Leases
While the majority of Courts addressing Yellowstone injunctions involve commercial leases,Yellowstone injunctions are available in certain instances involving residential leases. RPAPL 753(4), which is applicable only in New York City, grants a residential tenant who has been found in default of his lease a ten day period to cure lease violations before being subject to eviction. Because this statutory protection is available only in New York City, courts have permitted Yellowstone Injunctions in matters involving residential leases outside New York City.18
1 See, Village Center for Care v. Sligo Realty and Service Corp., 95 A.D.3d 219, 943 N.Y.S.2d 11 (1st Dep’t 2012); Sharp v. Norwood, 223 A.D.2d 6, 643 N.Y.S.2d 39 (1st Dep’t 1996), aff’d 89 N.Y.2d 1068 (1997)
2 First Nat’l Stores v. Yellowstone Shopping Center, 21 N.Y.2d 630, 290 N.Y.S.2d 721 (1968)
3 Graubard Mollen Horowitz Pomeranz & Shapiro v. 600 Third Avenue Associates, 93 N.Y.2d 508, 514, 693 N.Y.S.2d 91, 94 (1999)
4 Graubard Mollen Horowitz Pomeranz & Shapiro v. 600 Third Avenue Associates, 93 N.Y.2d 508,514, 693 N.Y.S.2d 91, 94 (1999); Trump on the Ocean, LLC v. Ash, 81 A.D.3d 713, 916 N.Y.S.2d 177 (2d Dep’t 2011)
5 Village Center for Care v. Sligo Realty and Service Corp., 95 A.D.3d 219, 222, 943 N.Y.S.2d 11, 13 (1st Dep’t 2012); Trump on the Ocean, LLC v. Ash, 81 A.D.3d 713, 716, 916 N.Y.S.2d 177, 181 (2d Dep’t 2011)
6 Graubard Mollen Horowitz Pomeranz & Shapiro v. 600 Third Avenue Associates, 93 N.Y.2d 508, 514, 693 N.Y.S.2d 91, 94 (1999)
7 Korova Milk Bar of White Plains, Inc. v. PRE Properties, LLC, 70 A.D.3d 646,648, 894 N.Y.S.2d 499, 501 (2d Dep’t 2010)
8 Korova Milk Bar of White Plains, Inc. v. PRE Properties, LLC, 70 A.D.3d 646,647, 894 N.Y.S.2d 499, 501 (2d Dep’t 2010)
9 Goldcrest Realty Company v. 61 Bronx River Owners, Inc., 2011 WL 1206171 (2d Dep’t 2011)
10 See, Korova Milk Bar of White Plains, Inc. v. PRE Properties, LLC, 70 A.D.3d 646,648, 894 N.Y.S.2d 499, 501 (2d Dep’t 2010)
11 Village Center for Care v. Sligo Realty and Service Corp., 95 A.D.3d 219, 943 N.Y.S.2d 11 (1st Dep’t 2012)
12 Id. 95 A.D.3d at 224, 943 N.Y.S.2d at 14
13 166 Enterpises Corp. v. IG Second Generation Partner, L.P., 81 A.D.3d 154, 917 N.Y.S.2d 143 (1st Dep’t 2011)
14 Id., 81 A.D.3d at 158, 917 N.Y.S.2d at 146
15 Barsyl Supermarkets Inc. v. Avenue P. Associates, LLC, 86 A.D.3d 545, 928 N.Y.S.2d 45 (2d Dep’t 2001)
16 Jemaltown of 125th Street Inc.v. Leon Betesh /Park Seen Realty Associates, 115 A.D.2d 381, 496 N.Y.S.2d 16, 18 (1st Dep’t 1985)
17 Terosal Properties, Inc. v. Bellino, 257 A.D.2d 568, 683 N.Y.S.2d 581 (2d Dep’t 1999)
18 Hopp v. Raimondi, 51 A.D.3d 726, 858 N.Y.S.2d 300 (2d Dep’t 2008)
