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Adam Leitman Bailey, P.C. Saves Client From Forfeiture of Its Valuable Commercial Lease in SoHo Just in the Nick of Time

When one of the world’s largest oriental rug and home furnishings wholesalers came to Adam Leitman Bailey, P.C. for help to defend it in an eviction proceeding instituted by its landlord that its prior counsel mishandled, Adam Leitman Bailey, P.C. had little time to spare.

Over twenty years ago, Adam Leitman Bailey, P.C.’s client entered into a long-term commercial lease with the landlord for retail space (the “Premises”) in a loft building in SoHo – New York City’s hottest retail market – that it utilizes as a showroom in connection with its antique and oriental rug business. Since the landlord’s loft building, which is located in a historic landmark district, is currently occupied nearly entirely by offices renting for considerably more than the Premises, the landlord, in bad faith, attempted to cut short the client’s lease to recapture the profit the landlord could have with another tenancy by concocting a bogus eviction proceeding against the client.

In furtherance of its nefarious scheme, the landlord served the client with a notice to cure (the “Notice”) falsely alleging, inter alia, that the client’s HVAC unit failed to comply with fire code obligations and that its bathroom was not in compliance with ADA standards. Unfortunately, the client’s prior counsel failed to move for a Yellowstone Application within the five-day cure period called for in the parties’ lease even though each and every one of the alleged defective conditions first arose openly and notoriously twenty years prior at the time of the parties’ execution of the lease. Notwithstanding the poor legal representation provided by the client’s former counsel, Adam Leitman Bailey, P.C. utilized creative legal arguments and found controlling case law to support the client’s entitlement to Yellowstone relief despite the fact that the client moved for such relief nearly a year after the lease’s cure period had expired. Generally, when a movant makes an application for Yellowstone relief after the expiration of the cure period, such relief will only be granted under exceptional circumstances.

A mere 24 hours prior to the landlord eviction trial, Adam Leitman Bailey, P.C. brought an order to show cause application seeking temporary injunctive relief, together with a Yellowstone Injunction enjoining the landlord from prosecuting the eviction proceeding. Based upon Adam Leitman Bailey, P.C.’s meticulous review of the parties’ lease and subsequent lease amendments and modifications, Adam Leitman Bailey, P.C. discovered that the purported defects – which had been in existence for more than two decades – that were delineated in the notice to cure were actually the obligation of the landlord pursuant to the explicit provisions of the parties’ third lease modification agreement. Further, Adam Leitman Bailey, P.C. pointed out to the Supreme Court that the cure period pursuant to the parties’ applicable default provision under the lease had not yet expired in light of the client’s diligent good faith efforts to cure by retaining experts, general contractors and architects, who began to prepare the applications and remediation plan, and with reasonable diligence and in good faith, commenced the requisite remediation. Adam Leitman Bailey, P.C. argued that the existence of a period in which a violation may be cured does not depend on the contents of the Notice, but rather upon the terms of the parties’ lease that specifically provided that if the default is of a nature that it cannot be completely cured within the cure period, and if the plaintiff shall have diligently commenced curing such default within the applicable cure period and thereafter continue to cure with reasonable diligence and good faith, then landlord is estopped from terminating the lease. Because the client promptly responded to the Notice by taking immediate action to cure the alleged defective conditions, which had been in existence for over two decades and were the responsibility of the landlord to remediate, Adam Leitman Bailey, P.C. argued that the Notice was null and void. Moreover, Adam Leitman Bailey, P.C. further argued that because the alleged defective conditions needed to first be approved by the loft board and the Landmarks Preservation Committee, the parties specifically contemplated at the time that the lease was executed, that the default period would effectively be tolled so long as the client undertook reasonable measures in good faith to cure any defective conditions. The Supreme Court agreed with all of Adam Leitman Bailey, P.C.’s arguments and granted the client with a temporary restraining order (TRO) staying the eviction trial in the lower court.

The grant of a TRO by the Supreme Court provided the client with significant leverage in negotiating a favorable settlement with the landlord. Faced with the potential issuance of a Yellowstone Injunction, which would have tied the litigation up for several years, the landlord caved and waived its entire six-figure demand for counsel fees, thereby retracting the previous demand that it made to the client’s prior counsel, and agreed to provide the client with a rental reduction throughout the duration of its lease.

Adam Leitman Bailey handled the matter.

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