The Extent to Which "Yellowstonre Injunctions" Apply in Favor of Residential Tenants: Who Will See Red, Who May Earn Green, and Who May Feel Blue?

Hon. Mark C. Dillon, Appellate Division of the NYS Supreme Court, and Fordham Law School (Adjunct Professor)

Abstract

Difficulties in the residential and commercial real estate markets have caused an influx of cases in the New York State courts by which banks seek the foreclosure of delinquent mortgages and landlords seek the eviction of tenants that are in default of rent payment obligations.

New York State has long recognized "Yellowstone injunctions" in the context of commercial leases, where tenants preemptively obtain court orders enjoining their landlords from terminating their breached leases. The concept is named after its case of origin, First Nat. Stores, Inc. v. Yellowstone Shopping Center, Inc., which was decided by the state's Court of Appeals in 1968. To be entitled to a Yellowstone injunction, the tenant must establish that it 1) holds a commercial lease, 2) received from the landlord a notice of default, notice to cure, or threat of termination of the lease, 3) the court application was made prior to the expiratioon of the tenant's cure period, and 4) there is a desire amd ability to cure the alleged default by any means short of vacating the premises. Various public policy grounds support the grant of Yellowstone injunctions in favor of commercial tenants willing to cure their breached leases.

The current economic climate may raise the question of the extent to which the Yellowstone concept might be expanded beyond commercial tenants, to residential tenants as well. Indeed, there have been a small number of cases where residential tenants have sought to co-opt Yellowstone remedies in their favor.

This article examines the extent to which Yellowstone relief has been recognized by courts in non-commercial contexts. Based upon a review of the relevant decisional and statutory authorities, Yellowstone injunctions may be obtained by residential owners of cooperative apartmewnts who have equitable interests in maintaining their proprietary leases; commercial tenants who breach their leases by improperly permitting residential uses of the premises; and holders of purely residential leases that have an articulable, peculiar, equitable interest in maintaining their tenancies, such as continuing in long-term rent-controlled apartments.

Yellowstone injunctions are not available to residential tenants residing in the City of New York, snd to tenants of commercial space in the City of New York used residentially under the state's "Loft Law," as their cure remedies have been, in effect, statutorily preempted by the cure provisions of RPAPL 753. Residentiasl tenants outside the City of New York, that have no particular equitable or proprietary interest in maintaining their leaseholds, are not entitled to Yellowstone injuunctions during their noticed cure periods to rectify breaches of their leases. This is true despite the language of certain recent appellate cases suggesting, superficially, that Yellowstone remedies have been extended in favor of residential tenants.

Yellowstone law is well-developed in the area of commercial landlord-tenant interaction, yet this is the first research article that examines Yellowstone relief in the context of the various forms of residential tenancies. This article may be socially, legally, and economically timely during the current economic recession, as further cases in New York State courts can be expected to probe the limits of Yellowstone injunctions relative to residential leases.