California has a "One-Action Rule" (sometimes referred to as "Single-Action Rule") which requires that the holder of a claim secured by real property proceed against the property first before pursuing the debtor personally. (Code Civ. Proc. § 726(a).) When an association records a lien it becomes the holder of a claim secured by real property but there is an express waiver of the "one-action rule" (also known as "the security first rule) in the Davis-Stirling Act. (Civ. Code § 5700(b).) Accordingly, an association can pursue the debtor (homeowner) personally even if it has recorded an assessment lien.
Selecting a Remedy. There are three legal remedies for collecting a debt:
- foreclose nonjudicially (a trustee’s sale),
- foreclose judicially, or
- sue the homeowner for a money judgment
Because of the exception described above, associations can start more than one collection effort. Even so, the board must ultimately select one remedy. For example, associations can lien a unit and initiate foreclosure and simultaneously file a lawsuit to recover unpaid assessments. (Civ. Code § 5720(b).) However, at some point the association must select its remedy. If the foreclosure results in a sale, the association must dismiss its lawsuit. Alternatively, if the lawsuit results in a judgment, the association must stop the foreclosure.
Judicial Foreclosure. If the association wants to foreclose but also wants a deficiency judgment, it must pursue judicial foreclosure rather than nonjudicial foreclosure. However, a deficiency judgment may have no value if it is uncollectable. Boards should consult with legal counsel on the best course to follow.
ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.