Termination Being Affected by Yellowstone Injunction

Q: After my tenant defaulted by failing to take care of several maintenance issues it was responsible for under the lease, I sent it a 30-day notice to cure. The notice also specified that if the tenant didn’t fix the maintenance problems, its lease would be terminated. The tenant claims that it is not responsible for the maintenance problems and it has asked a court for a ruling in its favor without a trial. In the meantime, the tenant hasn’t fixed the problems, but has asked a court for a Yellowstone injunction, “tolling” its 30-day period to resolve the issues. What is a Yellowstone injunction? If the tenant is granted a Yellowstone injunction, how will that affect my ability to terminate its lease?

A: A Yellowstone injunction would prevent you from taking any steps to terminate the tenant’s lease and toll—that is, postpone—the running of the time that the tenant has been given to cure—that is, fix—the default. The purpose of a Yellowstone injunction is to allow a tenant confronted by a threat of termination of its lease to essentially obtain a stay so that after a determination on the merits of the dispute with the owner, the tenant may cure any defects and avoid a forfeiture of the lease. In your case, it would allow the tenant to continue operating in its space while it is waiting for a determination from the court.

Your tenant will have to show that: (1) it has a commercial lease; (2) it received from you 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.

A recent New York case dealt with a tenant’s successful request for this type of relief. There, the owner discovered several environmental violations, which it claimed constituted a default under the terms of the lease. It sent the tenant a 60-day notice to cure and started proceedings to terminate the lease based on the default.

The tenant asked a court for a Yellowstone injunction. It satisfied the first three of the conditions. As to the fourth, the tenant contended that, upon receipt of the notice, it immediately investigated the violations alleged therein, took steps to remove those violations that were capable of immediate cure, and as to the others, is diligently performing corrective work.

Accordingly, the court granted the tenant’s request for a Yellowstone injunction, which restrained the owner from taking any steps to terminate the tenant’s lease while the court made a determination as to whether a default occurred. Additionally, the time the tenant was given to cure was tolled until the determination had been made [500-512 Seventh Avenue Limited Partnership v. 500 Seventh Avenue LLC, July 2015].