Lease Termination Delayed for Tenant to Cure Violations
Facts: The owner of a building used as a supermarket terminated its tenant's lease and ordered it to move out of the space because the tenant had allegedly “incurably” defaulted on the lease—that is, violated the lease in a way that couldn't be fixed—by failing to maintain adequate insurance and altering the space without the owner's permission. The tenant sued the owner, asking the court for a judgment in its favor without a trial to determine whether the lease termination was proper and for a preliminary injunction allowing it to stay in the space and attempt to cure—or fix—the violations during the legal process.
The owner asked the court to deny the tenant's request for a preliminary injunction, asserting that the tenant hadn't met the requirements because it hadn't demonstrated a good-faith effort to cure so far and because the violations, including reinstating its lapsed insurance policy, installing cooking improvements like an exhaust hood, and laying a new floor, couldn't be remedied at that point.
Decision: A New York court granted the request for an injunction and prohibited the owner from terminating the tenant's lease prior to the end of the legal proceedings on the matter so that the tenant could cure any alleged defaults.
Reasoning: The court agreed with the tenant that the violations and alleged violations could be cured. For example, the tenant asserted that there had been a misunderstanding about its insurance policy, which it was required to maintain and pay for under the lease. According to the tenant, it had accidentally provided inaccurate insurance information to the owner even though the liability policy was actually consistent with the lease at that time.
The tenant also argued that the owner couldn't take action against it for cooking in the space because, supposedly, the owner had witnessed it cooking multiple times over the course of four years and was aware of all of the alterations to its space—even suggesting some of the repairs and improvements. The owner said that the tenant couldn't argue that the owner had waived its claims regarding the cooking and alterations because the lease stated, “no provision of this lease shall be deemed to have been waived by Owner unless such waiver be in writing signed by Owner.”
The court said that an injunction couldn't be denied based on the tenant's failure to carry adequate insurance when the tenant actually did have the required insurance in place at that time. And while the owner argued that the tenant's alterations to the premises without prior written approval was an incurable breach of the lease, the court noted that a tenant may demonstrate its ability to cure a default for unauthorized alterations to a space by “stating its willingness to restore the premises to its prior condition, should the court find that the owner's permission was required.” The court pointed out that the tenant stated that it was willing to cure any default, and that, if its alterations to the space were found to be a default of the lease, it would cure such default by restoring the space and repairing any damage it made.
The owner further claimed that the tenant wasn't entitled to an injunction because it hadn't made a good-faith effort to stop cooking on the premises. The court said that a tenant's unwillingness to cure a purported default of a lease before a judicial determination of such a default is grounds to deny an injunction only where the tenant “affirmatively refuses to cure the default or flagrantly disobeys a clear provision of the lease.”
Here, the tenant claimed that the owner knew about its cooking since the start of the lease over four years ago. The owner didn't allege that the tenant was doing anything more than continuing a practice in which it has been engaging, with the owner's purported knowledge and without objection, since it initially took possession of the premises, said the court. Because the tenant was able and willing to cure any defaults of the lease, it was entitled to an injunction, the court determined.
Khatari v. Shami, April 2012