NY Great Stone Inc. v Two Fulton Square LLC, 2015 NY Slip Op 25090, 3/24/15 (Ritholtz, M.)

Lease; Breach; Yellowstone Injunction.

By Aaron Leaf | Staff Writer

Plaintiff signed a lease for commercial property with Defendant in March 2011.  The lease and subsequent rider obligated Plaintiff to conduct hydrostatic pressure tests on the sprinkler system and procure and maintain general liability insurance for the entire term of the lease. On November 2014, Plaintiff received a 10-day notice to cure. The notice addressed plaintiff’s failure to conduct a hydrostatic pressure test and obtain comprehensive general liability insurance.  Plaintiff then brought action asking the Court for a Yellowstone Injunction and to compel the defendant to provide access to a water valve on the property to conduct the hydrostatic pressure test.

Yellowstone injunctions, when granted, prevent a landlord from commencing proceedings to recover possession of their property while the dispute between the landlord and the tenant is litigated. This gives the tenant more time to cure alleged defects. Yellowstone injunctions have four elements. First, a tenant must show they had a commercial lease with a landlord. Second, a tenant must receive a notice of default. Third, the temporary restraining order must be filed before the notice expires. Fourth, the tenant must have the desire and ability to cure a defect.

The court found Plaintiff could not satisfy the fourth element, the ability to cure the defect. According to the lease, plaintiff was required to keep and maintain general liability insurance for the entire length of the lease. Plaintiff was only able to show that they had insurance from April 2014 to April 2015. Failure to maintain general liability insurance is a material defect that cannot be cured because prospective insurance policies cannot protect a landlord from unknown claims that arose during the gap in coverage. Therefore, the Yellowstone injunction was denied and plaintiff was unable to avoid forfeiture of property. Thus, the court did not address any other complaints by the plaintiff.

NY Great Stone Inc. v Two Fulton Square LLC, 2015 NY Slip Op 25090, 3/24/15 (Ritholtz, M.)

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