What is a Yellowstone injunction?
A Yellowstone Injunction is a type of injunction proceeding initiated by a tenant in New York State Supreme Court when the landlord seeks to terminate the lease due to a an alleged default by the tenant. By seeking a Yellowstone injunction, the tenant is seeking to maintain the status quo and prevent the landlord from prematurely terminating the lease. When a Yellowstone Injunction is granted it prevents the tenant from prematurely terminating the lease and the tenant is given the right to cure the alleged default without the notice to cure expiring [1].
A recent decision by NY courts changes the legal landscape in effect for more than the past five decades
First, the New York Court of Appeals decided First National Stores Inc v. Yellowstone in 1968, in which the Court permitted a commercial tenant that received a Notice to Cure from a landlord, to file a declaratory judgment action in the Supreme Court and essentially freeze the status quo on the time to cure the alleged default by preventing the dispute from being litigated in Housing Court [2]. At court, the tenant would just have to show that the landlord sent a Notice to Cure, and that the cure period had not yet expired. Thus, the tenant could ask the Court for a Yellowstone injunction, which would extend the time to cure the alleged default.
Recently, however, in 2019, the Court of Appeals upheld a decision that a tenant’s waiver of a declaratory judgment in a commercial lease provision was enforceable and not against public policy. In its decision, the Court reasoned that the parties were sophisticated and had equal bargaining power [3]. This decision changed the decision in First National Stores Inc., by permitting commercial landlords to prevent tenants from filing Yellowstone Injunction actions by having the tenant agree in the lease, to waive the right to file a declaratory judgment action. Thus at the present moment, if a tenant’s lease contained a declaratory judgment or Yellowstone Injunction waiver, the tenant’s only legal remedy is to argue that there was insufficient time to cure the default in a summary proceeding. The tenant will not receive additional time to cure and must have the issue of whether a default exists determined at a summary proceeding.
By preventing the tenant from filing an action for a declaratory judgment, the tenant must cure the violation within the time required under the lease or the Notice to cure otherwise the tenant’s lease may be terminated. In essence, upon the receipt of the Notice to cure, the tenant has two options. He or she may avoid the risk of lease termination by curing the default or he or she may risk losing the lease by allowing the lease period to run and thus expire, with the hope that the tenant can successfully convince the Court that no default exists.
Therefore, this recent decision by the New York Court of Appeals changes the legal precedent that had been in play for decades.
The information above is intended to provide limited information only and is not legal advice. The laws in the context of the validity of stipulation and settlement agreements are complex. If you are a party to a matter concerning a stipulation of settlement, or otherwise need further guidance in this or a related area of law, SINGH & RANI, LLP can assist you.
[1] https://definitions.uslegal.com/y/yellowstone-injunction/
[2] https://casetext.com/case/first-nat-stores-v-yellowstone-s-ctr
[3] https://law.justia.com/cases/new-york/court-of-appeals/2019/26.html
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