California Foreclosures & The 'One Action Rule' - Violators Could Lose Their Lien On Real Estate

A recent story from Lexology addresses the so-called "one action rule" that applies to foreclosures in California. An excerpt:

• The one action rule places limits on the ability of lenders to enforce and collect debt that is secured by real property located in California. While most states permit secured creditors to freely pursue the foreclosure of real property as well as the underlying debt simultaneously, California essentially requires creditors to exhaust the entirety of their real property security before suing on the underlying debt or before taking other action to collect against any of the debtor’s unpledged assets.
• Violation of the one action rule leaves lenders vulnerable to sanctions, including the potential loss of their lien on the real property. Certain conduct, including setoff against a debtor’s unpledged accounts, may run afoul of the one action rule. Lenders who have extended credit secured by California real property should carefully plan their enforcement and collection strategies in order to avoid violation of the one action rule.

Among the issues addressed in the article are:

• The One Action Rule and its Ramifications,
• What Constitutes Judicial Action and How to Avoid Tripping Over the One Action Rule,
• Why Non-Judicial Foreclosure over Judicial Foreclosure?,
• Preserving a Right to Judgment on the Debt,


• Completing Non-judicial Foreclosures in California,
• Some Practical Tips for Lenders.

For more, see Revisiting the one action rule for secured lenders: forget about California real property at your peril! (requires paid subscription; if no subscription, TRY HERE; or GO HERE - then click the appropriate link for the story).

Go here for links to several dozen California cases addressing the state's "one form of action" rule (which can be found at Section 726 of the Code of Civil Procedure of California).