Landmark Legislation to Protect Commercial Tenants Signed by the Governor

Assemblyman Steve Otis (D- Rye) and Senator John Liu (D- Queens) announced that their legislation to reinstate important protections for commercial tenants was signed into law by Governor Cuomo. The new law, A.2554/S.5614, will ensure small business owners have the right to go to court to challenge the unjust termination of their lease.

The legislation reinstates the landmark 1968 NYS Court of Appeals “Yellowstone” decision that has protected commercial tenants from lease terminations by guaranteeing the right of due process through the courts before a commercial landlord could execute a mid-term lease termination. The 1968 case and the new law make sure the rights of tenants and landlords are accurately determined before an eviction takes place.

Senator Liu said, “This law restores an important protection against eviction for small business owners. Commercial tenants can once again seek injunctive relief from the courts when faced with an abrupt eviction by an overzealous landlord. Thank you to Governor Cuomo for signing this bill into law.”

Assemblyman Otis applauded the signing of the legislation stating, “With the Governor’s approval of this legislation we now have restored the law that protects small businesses from arbitrary lease terminations and guarantees commercial tenants their day in court. We all benefit when our laws protect stability in commerce, enhanced here by letting a court weigh in when lease terms are under dispute and a landlord seeks summary eviction. An important principle for fairness in commerce was restored with the signing of this legislation.”

The “Yellowstone” decision gave tenants the right to seek a declaratory judgment and an injunction to delay speedy eviction until a court can determine which party is responsible for lease terms in question. Typically, tenants could resist lease termination by taking their landlord to court and having a judge determine whether the tenant had actually violated the terms of the contract. In 2018 an appellate court allowed the protections of the Yellowstone decision to be waived in a lease.

Last year, the Court of Appeals agreed with the Appellate Division decision to overturn Yellowstone. Both decisions included strong dissenting opinions and invited the legislature to clarify the law in state statute.

Without the legal protections offered by this legislation, commercial tenants would be vulnerable to arbitrary lease terminations by landlords without judicial review.

The new law reinstates the principle of the “Yellowstone” decision by establishing that the inclusion of such a waiver of the right to court review in a commercial lease shall be null and void as against public policy. Commerce is better served by having business disputes resolved with the benefit of due process. This legislation restores what has been viewed as an important protection for business stability that has existed since 1968.