February 24, 2018

The subject tenant in this story was a donut shop in Northern Manhattan. I represented the commercial landlord.

Tenant was scheduling deliveries through the lobby of my client’s building. Tenant’s vendors were not just wheeling boxes of merchandise, food, and beverages through the front entrance of the building, but they were leaving these deliveries on the floor of the lobby. Stacks of boxes were sometimes left for hours, right in the middle of a weekday. It was as if the lobby was tenant’s storage room. Needless to say, the lobby was obstructed, pedestrian traffic was impeded, fire codes were likely being violated, and it made the building look sloppy. All of this was prohibited by the lease.

The landlord wanted me to reach out to the tenant and get the behavior to stop. Obviously, I started by asking what the interactions between landlord and tenant had been already. The landlord forwarded me the typical email chain that happens between a landlord’s personnel and a tenant’s. 

The question, for me, was simply this – do I send a letter first or do I go straight to a notice to cure the lease default. Here are the pros and cons of each choice.

It would make more sense for me to send a letter if my investigation revealed that landlord had already made a decent attempt to solve the problem. Here, I was skeptical. The landlord was a big landlord, and had lower level people handling tenant communications, yet not an outside managing agent. The donut people were, actually, also a multi-layered organization. There was a principal somewhere who owned a bunch of donut franchises. The email chain I had been shown was between minions of the landlord and minions of the donut empire. I hate to jump in with a formal default notice if I feel like the parties have not really yet communicated. Also, a formal notice to cure lease default is necessarily a formulaic document and leaves little room for a constructive tone and it cannot end with an assurance that the landlord is invested in the tenant’s success and wishes to find a mutually beneficial solution. A letter is often a better way to open up a dialogue. 

On the other hand, I generally dislike “lawyer’s letters”. Anyone can write a letter. So what? A formal notice to cure a lease default is more aggressive and it moves the ball along in case the situation cannot be resolved and the landlord wants to terminate the lease and proceed with a holdover proceeding.

Then again, one must never forget that a commercial notice to cure lease default invites a Yellowstone injunction. A Yellowstone injunction application consists of a declaratory judgment complaint in New York State Supreme Court, accompanied by a stay application (which is routinely granted, at least in the form of a temporary restraining order, pending a hearing on a preliminary injunction), which seeks a trial outside of landlord and tenant court on the issue of whether the tenant is indeed in violation of the lease. This procedure is designed to toll the time the tenant would ordinarily have to cure a lease violation of a valuable commercial lease while the court resolves the issue of whether the tenant is indeed in violation and/or has cured the violation. If the court finds the tenant in violation, then by virtue of the stay of the notice to cure, the tenant still has the opportunity to cure the violation before the cure period ends. This process can buy the tenant significant time as the resolution of the proceeding can take months, if not years. See e.g., Jemaltown of 125th Street, Inc. v. Leon Betesh/Park Seen Realty Assocs., 115 A.D.2d 381 (1st Dept. 1985); Fratto v. Red Barn Farmers Market Corp., 144 A.D.2d 635 (2nd Dept. 1988).

Thus, a notice to cure lease default seemed like overkill for the situation. I opted to write a strong letter, but one that ended on a positive note, expressing my sincere and not-crazy hope that the situation could be resolved. In other words, I went with a plain old donut, not a strawberry cheese danish. It turned out to be the right call. The actual principal of tenant called me and emailed me immediately upon receipt of the letter, assured me the situation would be immediately corrected, and it was. No more lobby deliveries. 

Writing this post makes me want a strawberry cheese danish. 

Respectfully submitted,

Michelle Itkowitz