The action, plus legal recognition of the new homeowners association, offers a glimmer of hope to 264 Le Parc homeowners who fear falling into ruin -- and possibly losing their homes -- as a result of the debt.

A decision whether the new association must stand in for the old one or be free of the obligation to a Santa Barbara contractor could free homeowners from each having to pay an estimated $40,000.

Superior Court Judge John J. Hunter, who ruled last week that Le Parc condominium owners can be assessed thousands each year for the misdeeds of their former Le Parc Homeowners Association, will be replaced, a judge ruled Thursday.

Judge Henry J. Walsh also declared the new Le Parc Community Association valid and, in doing so, recognized its statutory right to challenge the judge scheduled to hear its case.

"We had an important victory today. I feel good," said Ferenc Gutai, acting president of the Le Parc Community Association. "I believe the tables will be turning today in our favor and that justice will prevail for the 264 homeowners who have suffered over the last several years with this thing.

"This decision may be favorable," Gutai said.

Attorneys also say the decision might boost the chances of the 264 homeowners whose utilities were put into jeopardy by a receiver for ZMCorp. The Santa Barbara building contractor won a $7 million judgment from the Le Parc Homeowners Association last summer for breach of contract and defamation related to repairs done in 1994.

"It was good news, a glimmer. This gives the homeowners some hope," said Darren M. Larsen, an attorney who represents 75 Le Parc condo owners. "Hopefully, this will allow homeowners to manage their affairs without any interference from ZM.

"They just want to move on with their lives and leave this matter behind."

A new judge will likely be appointed next week to decide whether the new association, deemed fraudulent by Hunter and ZM attorneys, must pay the debt. A hearing will soon follow.

Residents, tired of paying association dues while watching their premises decay because of the conduct of several association board members, had fired their old association last month and formed the new one to collect money for general upkeep.

A restraining order has barred it from paying for any services.

Glenn Campbell, the attorney for ZM Corp., could not be reached for comment Thursday.

Last week, Hunter ruled that Le Parc condo owners can be assessed $2,000 a year -- on top of their current homeowner dues -- to pay down the judgment.

If enacted, Hunter's ruling would force homeowners to pay combined assessments of more than $300 a month -- and not be guaranteed services such as water, gardening, trash pickup, electricity, swimming pools, sewer service and liability insurance.

Residents, who face unlimited liability connected with the debt, could lose their homes through liens and foreclosures if they refuse payment, attorneys say.

However, if a new judge decides the replacement homeowner association is valid and independent of the old one, then Hunter's order would not longer matter because the ZM Corp. receiver would have no way to access homeowners' money, said James Lingl, attorney for the Le Parc Homeowners Association.