By Michael Franciosi, HOAMCO Vice President of Operations
Quite simply, escheatment is the process of an institution handing over unclaimed property to its state. We may see this in the case of an abandoned bank account—the bank, after having tried to contact the owner of the account unsuccessfully, must escheat the funds to the state. One can actually search online for unclaimed property in any respective state. Give it a try and see if you have may have any unclaimed property held by a state in which you have lived! But, in the meantime… how does this impact homeowner associations?
A Homeowners Association or Condominium Association would be, in essence, the “institution” that may be holding funds that belong to someone else. This generally arises from a refund needing to be issued to a prior homeowner who had a credit balance (prepayment) on his ledger at the time that the property changed title.
Although HOAMCO sends refund checks to prior owners with credits on their accounts, if the title company or the seller (prior owner) has not provided a good forwarding address, the checks, when sent to the old property address, often end up being returned by the post office. Another situation that we see is if the amount of the refund is not perceived as substantial, the prior owner simply does not cash the refund check.
Regardless of the reason, if an association has in its possession any funds for prior owners, those funds are considered “unclaimed property”. An association cannot legally keep this money—therefore, HOAMCO undertakes the responsibility on behalf of our clients to escheat to the state this “unclaimed property” in order to keep the association compliant with the law.