New York Appellate Court Upholds Waiver of Yellowstone Action

In a recent appeal, the Supreme Court of the State of New York, Second Judicial Department held that a commercial tenant’s waiver of its right to seek a “Yellowstone” injunction is enforceable and not contrary to public policy.

What is a Yellowstone injunction? A Yellowstone injunction allows a commercial tenant to temporarily suspend the cure period stated in its lease following receipt of a default notice by landlord (cure period = the amount of time a tenant has to correct a violation of the lease). The cure period resumes only when the court issues a declaratory judgment stating that the alleged default exists. At that time, the tenant must cure its default. Conversely, if the court finds that there is no default, the matter ends.

The advantage of a Yellowstone injunction is that a tenant does not have to prove “probable success on the merits”, a requirement to obtain a standard injunction; a tenant need only show that it is ready, willing, and able to cure the default if the court finds that it exists.

How does this decision affect you, the commercial tenant? Without a Yellowstone injunction, you must either cure the alleged default, which can be costly, or not cure the default and wait for your landlord to initiate eviction proceedings. At that time, you can present your argument as to why there is no default. The latter option is risky in that, should your argument fall on deaf ears, you’ll likely be evicted.

The take-away. It’s best not to waive your right to seek a Yellowstone injunction. To that end, your attorney should review your commercial lease before you sign it. If the lease contains a waiver provision, your attorney can attempt to negotiate with your prospective landlord to have the waiver provision removed from the lease.

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