<b><i>Yellowstone</i></b> Injunctions When Prompt Cure Is Impossible

However, what some practitioners may not realize is that even if the tenant does not obtain a Yellowstone injunction prior to the expiration of the cure period asserted in the default notice, all hope may not be lost. Specifically, where: 1) the alleged default is of a nature that it is incapable of being cured within the time period provided in the default notice; and 2) with respect to defaults of such nature, the lease requires only that the tenant commence diligent efforts to cure — rather than complete a cure — within the allotted time, service of a notice of termination does not necessarily bar subsequent Yellowstone relief.

A Case in Point

This is well illustrated by the Appellate Division, First Department's decision in Village Center for Care v Sligo Realty and Service Corp, 95 A.D.3d 219. There, the lease required the tenant to perform certain electrical, plumbing and HVAC work. Ten years after the tenant completed the work, the landlord served a 10-day notice to cure, alleging that the tenant had failed to prove that the Landmarks Preservation Commission (LPC) had approved such work, and, further, that the tenant had failed to provide a mechanical ventilation certificate, proof of the structural stability of such work, and proof of a sprinkler hydrostatic test. The lease provided, in relevant part:

If the Tenant defaults in fulfilling any of the covenants of this lease other than the covenants for the payment of rent or additional rent … upon Owner serving a written ten (10) days' notice upon Tenant specifying the nature of said default and upon the expiration of said ten (10) days, if Tenant shall have failed to comply with or remedy said default, or if the said default or omission complained of shall be of a nature that the same cannot be completely cured or remedied within said ten (10) day period and if Tenant shall not have diligently commenced curing such default within such ten (10) day period, and shall not thereafter with reasonable diligence and in good faith, proceed to remedy or cure such default, then Owner may serve a written five (5) days' notice of cancellation of this lease upon Tenant … [emphasis supplied].

In response to the notice to cure, the tenant provided the landlord with an LPC permit, work plans stamped approved by the DOB, and other documentation relating to the work. Nevertheless, upon the expiration of the 10-day cure period, the landlord served a notice of termination. The landlord subsequently agreed to a 30-day extension of the termination date, during which period all defaults except for one were cured. With respect to this last default, the tenant was required to submit certain building-wide documentation that it requested from, but was never provided by, the landlord.

The tenant thereafter moved for a Yellowstone injunction. Supreme Court denied the motion as untimely, since the tenant interposed the motion after the expiration of the fixed 10-day cure period asserted in the notice to cure, and dismissed the action. However, the Appellate Division, First Department reversed, granted the Yellowstone injunction and reinstated the action, emphasizing that the lease provided for a longer period of cure 'if the said default or omission complained of shall be of a nature that the same cannot be completely cured or remedied within said ten (10) day period.' The court noted that when cure within 10 days was impossible, the lease required only that tenant commence diligent efforts to cure the defaults within the allotted time. Because the tenant did that, it was entitled to Yellowstone relief.

The Tap Tap Case

The First Department recently reaffirmed the continuing vitality of the Village Center for Care rule. In Tap Tap, LLC v 558 Seventh Ave. Corp., 144 AD3d 409, the landlord served a default notice upon the tenant, alleging five open violations of law with respect to the leased premises. The alleged defaults were of a nature that they could not be cured within the 15-day period set forth in the notice, and the parties' lease contained language virtually identical to the provision that was at issue in Village Center for Care.

After such 15-day period expired, the landlord served a notice of termination. Over one month later, the tenant moved for a Yellowstone injunction, but Supreme Court ultimately dismissed the action sua sponte. In reversing, the Appellate Division, First Department held, citing Village Center, “Accordingly, the matter is reopened, the complaint reinstated, and the matter remanded to Supreme Court to consider whether, under the circumstances, plaintiff's Yellowstone injunction was timely filed … and otherwise warranted on the merits … ”

Conclusion

Notwithstanding the lifeline provided by cases such as Village Center for Care and Tap Tap in the Yellowstone context, practitioners should make every attempt to avoid having to rely on them. When a client has been served with a default notice threatening to terminate its commercial tenancy, the diligent advocate will promptly prepare Yellowstone motion papers, get into court prior to the expiration of the cure period, and obtain a temporary restraining order tolling the obligation to cure. Even if there is a good argument that the alleged default cannot be cured within the requisite time period, an attorney should not subject the client's valuable commercial tenancy to the vicissitudes of the court system. That said, where, for whatever reason (such as, for example, through the inaction of an attorney unfamiliar with commercial landlord-tenant practice), a tenant served with a default notice did not obtain a temporary restraining order prior to the expiration of the cure period, Village Center for Care and Tap Tap provide a roadmap out of purgatory.

***** Alexander Lycoyannis is a member of the Manhattan real estate law firm of Rosenberg & Estis, P.C.