BILL NUMBER: S5614

SPONSOR: LIU
 
TITLE OF BILL:  An act to amend the real property law, in relation to
prohibiting leases from including a waiver of the right to a declaratory
judgment action

 
PURPOSE OR GENERAL IDEA OF BILL:

Amends the real property law to prohibit a lease from containing any
provision waiving or prohibiting the right of any tenant to bring a
declaratory judgment action with respect to any provision, term or
condition of such commercial lease.

 
SUMMARY OF PROVISIONS:

Section 1 adds a new section 235-h to the real property law to prohibit
a lease from containing any provision waiving or prohibiting the right
of any tenant to bring a declaratory judgment action with respect to any
provision, term or condition of such commercial lease.

              

Section 2 provides that this act shall take effect immediately.

 
JUSTIFICATION:

For the last 50 years, in cases where a landlord serves a commercial
tenant with a notice to cure a defect, and seeks to terminate a lease if
the defaults under the lease are not cured within a certain amount of
time, the tenant has had the right to seek additional time to cure. The
commercial tenant has been able to file for an injunction to toll the
period of time allowed to cure the default, and to prevent the landlord
from terminating the lease. This is known as a Yellowstone injunction,
(see First Nail. Stores v. Yellowstone Shopping Ctr., 21 N.Y.2d 630
(1968).

Until recently the question of whether a commercial tenant could waive
its right to obtain a Yellowstone injunction had not been ruled upon by
an appeals court until a recent ruling in the Second Department of the
Appellate Division (159 MP Corp. v. Redbridge Bedford, 2018 N.Y. Slip.
Op. 00537 (2d Dept, Jan.31, 2018) held the waiver language in the lease
was enforceable and not against public policy.  The court further found
that the legislature "has not enacted any specific or blanket statutory
provision prohibiting as void or unenforceable a tenant's waiver of
declaratory judgment remedies."

This legislation seeks to enact such a provision as a matter of public
policy and restore the right of commercial tenants to cure under a
declaratory judgment action as has been the practice since 1968.  The
ability to cure through this process protects commercial tenants from
landlords seeking to remove tenants in the middle of a lease period
without appropriate ability to cure or judicial review. To allow waiver
clauses of the Yellowstone injunction will be disruptive of commerce,
unfair to commercial tenants and allow landlords to use minor lease
issues as a method to remove and replace tenants in the middle of lease
terms. Commercial landlords would be able to prematurely terminate leas-
es whenever they wanted to force a tenant out, whether the default was
legitimate or not, and the tenant who agreed to a waiver would have no
recourse.

 
PRIOR LEGISLATIVE HISTORY:

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

N/A

 
EFFECTIVE DATE:
This act shall take effect immediately.