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A New York appellate court ruled on Thursday, of last week, that when landlords issue a "notice to cure" or "notice of default" -- a predicate to a lease termination -- tenants are not required to commence curing any alleged lease defaults (before there has been a judicial determination that the lease has, in fact, been violated).

The Appellate Division, First Department, reversed the Order of a New York County Supreme Court Justice (Goetz), which had denied a tenant’s Yellowstone application. (A Yellowstone is a form of equitable relief sought by a commercial tenant, in order to prevent its landlord from prematurely terminating the parties' lease due to an alleged breach. This remedy allows the tenant to continue occupying the premises, until such time as there has been a formal determination as to whether or not the tenant is default, and allows the latter an opportunity to cure -- should it be found responsible for the condition(s) in question -- in order to avoid a forfeiture of its valuable commercial space.)

The Decision and Order, in Quik Park 808 Garage, LLC v 808 Columbus Commercial Owner LLC,[1]  was issued unanimously by a four-judge panel, and confirms that, in order to take advantage of this discrete remedy, a tenant need only show an ability and willingness to cure the alleged lease default(s), by any means short of vacating the premises. In what should come as a relief to thousands of commercial lessees across the state—especially at a time when many continue to face COVID-related financial hardships—the decision clearly holds that tenants need not “take steps to cure an alleged default before there has been a determination that the lease was violated.”

Newman Ferrara partner, Jarred Kassenoff, who represented the commercial tenant in the action noted that, “The whole point of Yellowstone relief is to preserve the status quo -- to afford the tenant an opportunity to contest the default, without risking the tenancy’s forfeiture. This decision not only preserves that fundamental tenet but sends a ray of hope to many who are reeling financially due to the pandemic, and who are facing potential eviction because of their inability to pay the rent due.”

While New York State Governor Andrew Cuomo has temporarily banned commercial evictions given the public-health “disaster,” (with the latest order extending the moratorium through October 20, 2020), there remain a number of unanswered questions about whether these protections only prohibit landlords from suing or evicting tenants for the nonpayment of rent, or whether they also apply to other lease violations.

If you are a commercial tenant faced with a threatened termination of your lease, please feel free to reach out to one of our attorneys for assistance.


[1] 2020 NY Slip Op 05605.