Yellowstone Injunction: A Crucial Legal Tool for Commercial Tenants

The Yellowstone injunction is a legal tool that all co-ops and condos with commercial space should be familiar with. It is a protective shield for commercial tenants that can complicate a board’s eviction efforts — and potentially turn what should be a straightforward eviction into a prolonged legal battle. 

ELEMENTS FOR INJUNCTION. The Yellowstone injunction arises out of an alleged default under a commercial lease. This might be for nonpayment of rent or not having a certificate of occupancy. The default might also be for illegally subletting, not performing repairs or maintenance that are required by the lease, or not maintaining insurance coverage. The Yellowstone injunction may be available to a commercial tenant in any of those contexts as long as the tenant can show that it holds a commercial lease; that it was issued a notice of default or some other threat of termination of its commercial lease; that the time for it to cure the default has not lapsed yet; and that it has the ability to cure. If the commercial tenant can show those four elements, it can get a Yellowstone injunction, which maintains the status quo while the claims are litigated.

OPTIONS FOR BOARDS. In cases of nonpayment, landlords can initiate a nonpayment proceeding in housing court, which allows commercial tenants to stay if they cover the amounts owed. Alternatively, a holdover or eviction proceeding may be pursued, presenting a higher risk for tenants because it could lead to termination of their lease without a chance to remain by simply paying up. This can make holdover threats more compelling, pushing tenants to negotiate or rectify the issue early. A board is going to want to consider whether this more aggressive approach would be beneficial based on the circumstances. 

INJUNCTION MECHANICS. A Yellowstone injunction must be filed in New York’s Supreme Court, not housing court. That can add complexity for commercial tenants because Supreme Court proceedings allow for discovery, which can reveal evidence like lease documents or payment records. However, the process may not always demand extensive evidence, since defaults often revolve around straightforward financial or contractual matters. Oftentimes, a resolution can be reached more quickly in Supreme Court than in housing court. In many cases, boards and landlords prefer to avoid a lengthy litigation process and negotiate directly with the tenants.

STRATEGIC ADVANTAGES FOR BOARDS. Boards often strategically initiate eviction proceedings, anticipating a Yellowstone injunction. While this might seem counterintuitive, it compels commercial tenants to address issues promptly and collaboratively, ensuring a faster and more effective resolution. Otherwise, the tenant runs a significant risk of losing whatever they've invested in the property. If the tenant fails to secure a Yellowstone injunction within the cure period, the landlord gains significant leverage, potentially allowing termination of the lease. Boards should consult experienced counsel when considering initiating default notices or eviction proceedings, since knowing which defaults allow cure rights or require notices can significantly strengthen their position.

TYPICAL RESOLUTIONS. Most cases involving a Yellowstone injunction are resolved through negotiation, often without full litigation. This can save boards legal costs and the time required for court battles. In situations where the tenant cannot cure, such as expired insurance obligations, Yellowstone injunctions may be denied. For boards, consulting a seasoned attorney early in the process is crucial to navigating lease provisions effectively and selecting the best strategy for each specific case.