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Commercial Tenant Defaults and Yellowstone Injunctions

Massimo D'Angelo, Partner, Blank Rome in Legal/Financial

New York City

When a commercial tenant stops paying rent, it can negatively affect a building’s revenue stream. Non-monetary defaults can be equally troubling, and in many cases boards can go to court and threaten to terminate the lease of a commercial tenant who has breached the lease. However, in some cases boards are impeded by a Yellowstone injunction. This is based on case law dating back to 1968 and stands as the most potent weapon in a tenant's arsenal when faced with landlord-tenant summary eviction proceedings. The Yellowstone injunction is unique to New York and acts as a safeguard against hasty eviction by shifting the case from the expedited procedures of landlord-tenant court to Supreme Court, allowing for a more thorough examination of the issues at hand.

Four elements of a Yellowstone injunction. Yellowstone injunctions can be obtained fairly easily by commercial tenants if four requirements are met, firstly that the plaintiff holds a commercial lease. Secondly, the landlord must have served a notice to cure, specifying the alleged violations. A third criteria is that a specific cure period is established in the commercial lease, and the tenant must move for the injunction before it expires. Lastly, the tenant must express a commitment to doing everything possible short of vacating the premises to rectify the lease violations.

Non-monetary defaults. Courts typically do not grant Yellowstone injunctions for non-payment alone, although this shifted somewhat during the pandemic. Non-monetary defaults, including safety issues, are when Yellowstone injunctions really come into play. Typically in commercial leases, a tenant has to operate its business in accordance with law and remediate any violations that come up. In one case, a commercial tenant storing e-bike batteries prompted safety concerns for a board, leading to a Yellowstone injunction. The ensuing resolution involved FDNY inspections, expert consultations and, ultimately, the co-op board repurchasing the unit to regain control over leasing decisions.

Strategic use. Boards often strategically initiate eviction proceedings, anticipating a Yellowstone injunction. While this might seem counterintuitive, it compels commercial tenants to address issues promptly and collaboratively, ensuring a faster and more effective resolution. In one case involving a condo in Tribeca, a Yellowstone injunction was used by a restaurant that was receiving complaints about noise disturbances due to improper HVAC venting. Residents could hear endless loud clangingand banging, which was causing a very high level of nuisance.  A Yellowstone injunction brought the matter to the Supreme Court. Once you're in Supreme Court, you have the full scope and ability to get discovery and hash all these issues out. Experts were engaged to determine responsibility and a resolution was reached with all the parties at the table coming to a creative solution and working together. 

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