By: Matt Duffy
While many Americans have seen the sights at Yellowstone National Park or are captivated by the Dutton family drama on Paramount’s “Yellowstone,” it is likely that they have not heard of a Yellowstone Injunction. However, if you are a tenant in a commercial real estate lease, it is a powerful tool to have when you are in a dispute with your landlord.
A Yellowstone Injunction is a restraining order that tolls the curing period for an alleged default on a commercial real estate lease while the tenant challenges the allegation. The name stems from the landmark 1968 New York Court of Appeals case, First National Stores, Inc. v. Yellowstone Shopping Center, Inc. In that case, a dispute arose between the landlord, a commercial building owner, and the tenant, a store, over a dispute as to whose duty it was to install sprinklers. By the time the tenant brought an order to show cause for a preliminary injunction, the cure period expired and the landlord terminated the lease. The court reasoned that the lease was properly terminated and that the tenant should have obtained a temporary restraining order before the end of the cure period so that it could preserve “the status quo.” First Nat’l Stores, Inc. v. Yellowstone Shopping Ctr., Inc., 21 N.Y.S. 2d 630, 637 (1968).
In order to obtain a Yellowstone injunction, the plaintiff-tenant must establish four elements: “(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.” 225 E. 36th St. Garage Corp. v. 221 E. 36th Owners Corp., 211 A.D.2d 420, 421 (1st Dept., 1995). And as soon as a Yellowstone Injunction is granted, the tenant’s cure period is tolled until the New York Supreme Court determines whether a default exists. However, the granting of a Yellowstone Injunction does not prevent the tenant from fulling other duties and responsibilities owed to the landlord, such as the failure to pay rent.[1] Moreover, certain defaults, such as breach of contract, are incurable and therefore are ineligible to obtain a Yellowstone Injunction.[2]
For over 50 years, a Yellowstone Injunction was implied in all commercial lease contracts. This all changed in May 2019 with 159 MP Corp. v. Redbridge Bedford LLC, 33 N.Y. 3d 353 (2019). In 159 MP Corp., by a slim majority, the New York Court of Appeals affirmed the lower court’s ruling that a Yellowstone Injunction waiver in a commercial lease agreement was enforceable and “does not violate the type of public policy interest that would outweigh the strong public policy in favor of freedom of contract.” Id. at 363. This sent landlords and tenants into a frenzy and an increase in leases including anti-Yellowstone Injunction. However, by December 2019, New York State Legislature enacted New York Real Property Law §235-h stating that “No commercial lease shall contain any provision waiving or prohibiting the right of any tenant to bring a declaratory judgment action with respect to any provision, term, or condition of such commercial lease. The inclusion of any such waiver provision in a commercial lease shall be null and void as against public policy.”[3] The passage of this statute effectively overruled the Court’s ruling and enshrined a tenant’s right to seek a Yellowstone Injunction. Since the passage of §235-h, Yellowstone Injunctions remain available to commercial tenants and have been a handy tool for tenants in a dispute.
Thus, like the untamed landscapes of the national park or the fierce land disputes in the television series, a Yellowstone Injunction serves as a safeguard, preserving a tenant’s right to protect their property before it is irreversibly taken away.