Late last year, the New York Supreme Court decided 172 Madison (NY) LLC v. NMP Grp., LLC, in which it examined New York’s one-action rule, a complex and often misunderstood rule that can have huge implications for lenders providing or servicing loans secured by real property in jurisdictions that have such rules, such as New York and California. This article provides background on the one-action rule and other anti-deficiency statutes before analyzing the holding in 172 Madison. It then examines the rule’s application in other jurisdictions, and provides some practical tips for lenders that operate in one- action rule States.

I. Background -

Savvy lenders understand the many risks attendant with financing business loans in today’s markets. They use a number of tools and strategies to mitigate their risk of loss on these loans, including personal guaranties and asset collateralization. A personal guaranty is an unsecured promise by an individual (who is typically closely associated with a business seeking a loan) to make loan payments in the event the business is unable to do so. Generally, if the borrower defaults on its loan, then the lender can file suit against both the borrower and the guarantor to recover the remaining balance of the debt.