If you rent a commercial property, such as a storefront, and your landlord claims you are in violation of your lease, what legal remedies do you have? Specifically, how can you prevent a quick eviction before you even have a chance to remedy or contest the alleged violation?
In New York, a commercial tenant may seek what is known as Yellowstone Injunction. This does not refer to the famous national park, but rather a1968 decision by New York's Court of Appeals. Essentially, a Yellowstone Injunction preserves the status quo until the landlord and tenant resolve their dispute, either voluntarily or through extended litigation.
Keep in mind, a tenant may only seek a Yellowstone Injunction after the landlord has served notice of an alleged defect or default, and before any termination of the lease or eviction takes place. In other words, if the landlord gives you ten days to correct a defect, you take no action, and the landlord subsequently terminates the lease, it is too late to ask a judge for a Yellowstone Injunction.
A High-Class Lease Dispute
Recently, a high-profile Yellowstone Injunction dispute emerged between the world-famous Italian fashion design company Giorgio Armani and the landlord of its flagship store on Manhattan's Madison Avenue. Armani has subleased its nearly 17,000 square-foot space for more than two decades. In 2011, Armani signed a sublease extension with the then-master lease holder which lasts through 2025. Under the extension, Armani pays $3.5 million in annual rent.
Shortly after Armani signed its extension, SL Green acquired the master lease and later the underlying real property. In March of this year, SL Green notified Armani it needed to increase its rent. SL Green argued Armani was paying far below-market rates and the landlord could no longer turn a profit on the property. Since SL Green both owned the property and held the master lease, it effectively defaulted to itself, resulting in the termination of Armani's sublease with ten years remaining.
Armani promptly filed suit in Manhattan Supreme Court seeking a Yellowstone Injunction. The matter remains pending before Judge Charles E. Ramos. On August 5, Judge Ramos issued apreliminary ruling regarding the terms of Armani's continued occupancy of the Madison Avenue store while the litigation is resolved. Armani said it should only have to continue paying the $3.5 million rent specified in the sublease. SL Green argued the rent should be increased to reflect “fair market value,” which its appraiser estimated at more than $10 million per year, three times Armani's current rate. SL Green further asked the judge to order Armani post a bond of more than $96 million to cover the landlord's potential losses as it cannot redevelop the Madison Avenue site while Armani remains a tenant.
Judge Ramos sided with Armani. He said any planned redevelopment is “speculative” at this point, and the $96 million bond demand was “excessive.” The judge said Armani could continue to occupy the property at its current rent. He also ordered a more modest $750,000 to insure SL Green's anticipated attorney's fees and related legal costs.
Need Help With a Commercial Lease?
Most landlord-tenant disputes do not involve such high-profile companies or millions of dollars in Manhattan real estate. But even the simplest commercial lease can lead to complex litigation. Whether you are the landlord or the tenant, it is essential that you work with an experienced New York real estate attorney when dealing with any sort of lease dispute.Contact our offices today if you need to speak with a qualified attorney right away.