Landlord & Tenant

Lease Terms Govern Availability of Yellowstone Injunction

Village Center for Car v. Sligo Realty and Service Corp.

NYLJ 4/11/12, p. 21, col. 1

AppDiv, First Dept.

(Opinion by Acosta, J.)

Tenant appealed from Supreme Court's denial of its motion for a Yellowstone injunction. A unanimous Appellate Division reversed, holding that Yellowstone relief is available after expiration of landlord's 10-day notice to cure if the lease provides for a longer cure period when tenant is not able to cure within 10 days.

In 2000, landlord and tenant entered into a lease for second-floor space to be used as an office. The lease term was for 15 years, six months, and 15 days, and required tenant to perform work on the premises, which was completed by 2001. On March 28, 2011, landlord served tenant with a 10-day notice to cure, alleging that tenant had failed to comply with a variety of lease provisions relating to obtaining city approvals for the work performed. The notice specified a cure date of April 15, 2011. Although the lease authorized landlord to serve a 10-day notice to cure, it provided that when the alleged default could not be cured within 10 days, landlord would be entitled to serve a five-day notice of termination only if tenant “shall not have diligently commenced curing such default within such ten (10) day period ' .” In response to landlord's 10-day notice, tenant provided most of the documentation requested by landlord. On May 4, tenant was served with a notice of termination. The landlord subsequently agreed to extend the termination date to June 16. During the extension period, tenant cured all of the defects except that it did not provide landlord with the city's waiver of a sprinkler hydrostatic test for the leased premises. Tenant could obtain that waiver only by providing the city with a copy of the building-wide hydrostatic test. Although tenant asked landlord for the building-wide test, landlord did not respond. Tenant then sought a Yellowstone injunction to prevent termination of the lease, but Supreme Court contended that tenant's application was untimely. Tenant appealed.

In reversing, the Appellate Division held that when a lease, like the one in this case, contains a cure period longer than 10 days in case the default cannot be cured within 10 days, an application for a Yellowstone injunction is timely if made before the lease's longer cure period has expired. In this case, the court noted that although it was theoretically possible for tenant to obtain the required waiver from the city within 10 days, tenant could only obtain that waiver if it produced the results of the building-wide hydrostatic test, which the landlord admitted it had failed to provide. As a result, the longer cure period in the lease was in effect, because tenant had commenced diligent efforts to cure the defaults. Tenant's application for Yellowstone relief was therefore timely.

COMMENT

New York courts have consistently held that a tenant cannot obtain a Yellowstone injunction after expiration of the applicable cure period. This means that applications for Yellowstone relief made after the cure period has run will be denied, even if the landlord has not yet terminated the lease. For example, in Goldcrest Realty Co. v. 61 Bronx River Rd. Owners, Inc., 83 A.D.3d 129, landlord sent notices to cure to a residential co-op demanding that it cure certain defaults by Oct. 2, 2009. After the co-op applied for a Yellowstone injunction on Oct. 14, 2009, the landlord effected valid termination on Oct. 15, 2009. Although tenant's Oct. 14 application preceded landlord's termination of the lease, the court denied tenant's request because the Oct. 2 cure period had already expired.

The First and Second Departments have both upheld unspecified cure periods that depend on tenants' diligent efforts. In Long Is. Gynecological Servs. v. 1103 Stewart Ave., 224 A.D.2d 591, the parties' lease included a 30-day cure period, as well as “an unspecified longer cure period if such default 'cannot be completely cured within thirty (30) days and [tenant] thereafter proceeds with reasonable diligence and in good faith to cure.'” Tenant did not apply for the injunction within the 30-day cure period, but proceeded with diligent efforts. Since the alleged defaults could not be cured in 30 days, the court granted tenant's application. Similarly, the lease in Becker Parkin v. 450 Westside Partners, 284 A.D.2d 112, included an initial cure period, and extended the period, for as long as tenant exercised diligent efforts, for defaults that could not be cured within the initial period. Although tenant was unable to cure within the initial period, the court granted the injunction in light of tenant's efforts to cure.

The Second Department's decision in Korova casts doubt on the continued vitality of Long Is. Gynecological. In Korova itself, the court reached the uncontroversial conclusion that an application for a Yellowstone injunction must be made “prior to the expiration of the cure period set forth in the lease and the landlord's notice to cure.” But, in doing so, the court expressly rejected Long Is. Gynecological to the extent it “may be construed as fixing a different or longer period of time in which an application for Yellowstone relief must be made.” However, neither Korova nor any subsequent case has held a Yellowstone injunction untimely when the applicant applied while making diligent efforts to cure pursuant to a diligent efforts clause. On its facts, then, the court in Korova could not have intended to invalidate diligent efforts clauses altogether. More likely, the court was addressing tenant's strained reading of Long Is. Gynecological, which was that diligent efforts could extend a fixed cure period even absent a diligent efforts provision. The court rejected tenant's application because the parties' lease did not include a diligent efforts provision, and tenant applied after the cure period had run.

Lease Terms Govern Availability of Yellowstone Injunction

Village Center for Car v. Sligo Realty and Service Corp.

NYLJ 4/11/12, p. 21, col. 1

AppDiv, First Dept.

(Opinion by Acosta, J.)

Tenant appealed from Supreme Court's denial of its motion for a Yellowstone injunction. A unanimous Appellate Division reversed, holding that Yellowstone relief is available after expiration of landlord's 10-day notice to cure if the lease provides for a longer cure period when tenant is not able to cure within 10 days.

In 2000, landlord and tenant entered into a lease for second-floor space to be used as an office. The lease term was for 15 years, six months, and 15 days, and required tenant to perform work on the premises, which was completed by 2001. On March 28, 2011, landlord served tenant with a 10-day notice to cure, alleging that tenant had failed to comply with a variety of lease provisions relating to obtaining city approvals for the work performed. The notice specified a cure date of April 15, 2011. Although the lease authorized landlord to serve a 10-day notice to cure, it provided that when the alleged default could not be cured within 10 days, landlord would be entitled to serve a five-day notice of termination only if tenant “shall not have diligently commenced curing such default within such ten (10) day period ' .” In response to landlord's 10-day notice, tenant provided most of the documentation requested by landlord. On May 4, tenant was served with a notice of termination. The landlord subsequently agreed to extend the termination date to June 16. During the extension period, tenant cured all of the defects except that it did not provide landlord with the city's waiver of a sprinkler hydrostatic test for the leased premises. Tenant could obtain that waiver only by providing the city with a copy of the building-wide hydrostatic test. Although tenant asked landlord for the building-wide test, landlord did not respond. Tenant then sought a Yellowstone injunction to prevent termination of the lease, but Supreme Court contended that tenant's application was untimely. Tenant appealed.

In reversing, the Appellate Division held that when a lease, like the one in this case, contains a cure period longer than 10 days in case the default cannot be cured within 10 days, an application for a Yellowstone injunction is timely if made before the lease's longer cure period has expired. In this case, the court noted that although it was theoretically possible for tenant to obtain the required waiver from the city within 10 days, tenant could only obtain that waiver if it produced the results of the building-wide hydrostatic test, which the landlord admitted it had failed to provide. As a result, the longer cure period in the lease was in effect, because tenant had commenced diligent efforts to cure the defaults. Tenant's application for Yellowstone relief was therefore timely.

COMMENT

New York courts have consistently held that a tenant cannot obtain a Yellowstone injunction after expiration of the applicable cure period. This means that applications for Yellowstone relief made after the cure period has run will be denied, even if the landlord has not yet terminated the lease. For example, in Goldcrest Realty Co. v. 61 Bronx River Rd. Owners, Inc., 83 A.D.3d 129, landlord sent notices to cure to a residential co-op demanding that it cure certain defaults by Oct. 2, 2009. After the co-op applied for a Yellowstone injunction on Oct. 14, 2009, the landlord effected valid termination on Oct. 15, 2009. Although tenant's Oct. 14 application preceded landlord's termination of the lease, the court denied tenant's request because the Oct. 2 cure period had already expired.

The First and Second Departments have both upheld unspecified cure periods that depend on tenants' diligent efforts. In Long Is. Gynecological Servs. v. 1103 Stewart Ave., 224 A.D.2d 591, the parties' lease included a 30-day cure period, as well as “an unspecified longer cure period if such default 'cannot be completely cured within thirty (30) days and [tenant] thereafter proceeds with reasonable diligence and in good faith to cure.'” Tenant did not apply for the injunction within the 30-day cure period, but proceeded with diligent efforts. Since the alleged defaults could not be cured in 30 days, the court granted tenant's application. Similarly, the lease in Becker Parkin v. 450 Westside Partners, 284 A.D.2d 112, included an initial cure period, and extended the period, for as long as tenant exercised diligent efforts, for defaults that could not be cured within the initial period. Although tenant was unable to cure within the initial period, the court granted the injunction in light of tenant's efforts to cure.

The Second Department's decision in Korova casts doubt on the continued vitality of Long Is. Gynecological. In Korova itself, the court reached the uncontroversial conclusion that an application for a Yellowstone injunction must be made “prior to the expiration of the cure period set forth in the lease and the landlord's notice to cure.” But, in doing so, the court expressly rejected Long Is. Gynecological to the extent it “may be construed as fixing a different or longer period of time in which an application for Yellowstone relief must be made.” However, neither Korova nor any subsequent case has held a Yellowstone injunction untimely when the applicant applied while making diligent efforts to cure pursuant to a diligent efforts clause. On its facts, then, the court in Korova could not have intended to invalidate diligent efforts clauses altogether. More likely, the court was addressing tenant's strained reading of Long Is. Gynecological, which was that diligent efforts could extend a fixed cure period even absent a diligent efforts provision. The court rejected tenant's application because the parties' lease did not include a diligent efforts provision, and tenant applied after the cure period had run.