Tenant Entitled to Yellowstone Injunction While Awaiting Lease Decision

Facts: A souvenir shop tenant’s lease that was signed in 2000 required it to provide an estoppel certificate to the owner of the building within 10 days. There was a dispute between the owner and tenant as to whether that version of the lease or a new lease that had been executed in 2013 controlled the space the tenant rented. The 2013 lease didn’t require the tenant to provide an estoppel certificate. The tenant wanted to wait until the dispute was settled to sign an estoppel certificate, in the event that the 2000 lease controlled the situation.

The owner told the tenant that its failure to give it the estoppel certificate was a default of its lease and that the lease would be terminated. The tenant asked a New York trial court for a Yellowstone injunction, which would toll—or pause—the period of time that the tenant had to cure the default—that is, fix, the alleged breach of its lease—until a determination had been made as to which lease controlled the situation.

Decision: The New York trial court granted the tenant’s request for a Yellowstone injunction.

Reasoning: The trial court noted that a Yellowstone injunction maintains the status quo so that a commercial tenant, when confronted by a threat of termination of its lease, may protect its investment in the leasehold by obtaining a stay tolling the cure period so that upon an adverse determination on the merits the tenant may cure the default and avoid a forfeiture.

The trial court pointed out that in routinely granting Yellowstone applications to further the state’s policy disfavoring forfeitures, the courts accept “far less than the normal showing required for preliminary injunctive relief.”

In order to obtain a Yellowstone injunction, the tenant had to establish that: (1) it holds a commercial lease; (2) it received from the landlord 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.

The trial court concluded that the tenant met all of those requirements. The crux of the dispute was which lease was valid. But the tenant had demonstrated that it had “at least one lease.” The tenant also showed that it was prepared, and maintained the ability, to cure the alleged default, if the court should determine that the 2000 lease, and not the 2013 lease, governed the tenancy. 

• Worldwide Gifts, Inc. v. 20 W. 33’d St. Prop. Owner, LLC, January 2017