Meet Deadline for Yellowstone Injunction

January 28, 2016
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Some tenants who receive default notices from the owner of the space they rent believe that they haven’t actually defaulted, and that the owner is wrong. They might choose to resort to legal proceedings, but this is problematic if the cure period—that is, the period they are given to fix a default—in the lease will expire before a court can make a determination. In that case, it could be wise to ask a court for a Yellowstone injunction.

A Yellowstone injunction maintains the status quo so that a commercial tenant, when confronted by the threat of lease termination, may protect its investment in the lease by obtaining a “stay” tolling the cure period so that upon an adverse determination on the merits of the case the tenant may cure the default and avoid a forfeiture of the lease. But meeting the deadline to apply for this type of relief is critical. A New York case demonstrates why.

There, a retail tenant was required by its lease to get the owner’s consent for all assignments and subleases. The tenant defaulted on its lease by, among other violations, assigning without permission the lease to its separate corporate entity, which later subleased the space to a jewelry store.

The owner served eight separate default notices on the tenant and its corporate entity requiring them to cure each default within 15 days of receiving the notices. The tenant claimed that no default had occurred. The owner sent lease termination notices to the tenant demanding that it vacate the space.

The tenant asked a trial court for a Yellowstone injunction, but a New York trial court denied the tenant’s motion. To obtain a Yellowstone injunction, a tenant must demonstrate that: (1) it holds a commercial lease; (2) it received from the owner either a notice of default, a notice to cure, or a threat of termination of the lease; (3) it requested injunctive relief prior to both the termination of the lease and the expiration of the cure period set forth in the lease and the owner’s notice to cure; and (4) it is prepared and maintains the ability to cure the alleged default by any means short of vacating the premises.

The trial court noted that, “essential to obtaining a Yellowstone injunction is a demonstration by the tenant that the motion is timely.” Here, the tenant asserted that the eight default notices and the four termination notices were procedurally defective, in that they were addressed and delivered to the former address of the tenant.

The owner produced confirmation receipts from a delivery service that the notices had been served at the tenant’s last known address and at its actual place of business, in accordance with the lease terms. The court found that the notices of default requiring the tenant to cure within 15 days of its receipt, as well as the notices of termination, were properly addressed under the terms of the lease, and were not procedurally defective.

The court pointed out that the notices of default were served no later than Oct. 13, so the 15-day period in which to cure or move for a Yellowstone injunction expired on Oct. 28. But the tenant didn’t seek to cure the defaults, and didn’t file the motion for a Yellowstone injunction, until Dec. 4. The court also noted that the failure to obtain the owner’s prior consent to the assignment wasn’t capable of being cured in any event [Riesenburger Properties, LLLP v. Pi Associates, L.L.C., et al., June 2015].