What Is Reclamation?

Reclamation is the process of demanding the return of property to a former owner in the event of dormancy, non-payment, fraud, or some other irregularity. Reclamation may be sought in a number of contexts:

• In the financial markets, a trader may demand reclamation, or repayment, for stocks or other securities purchased, due to some error in the transaction.
• Reclamation is sought to recover funds from neglected accounts.
• It may also refer to the right of a seller to resume ownership of a property if the buyer fails to meet the terms of the purchase agreement.

In an entirely different context, reclamation refers to restoring lands such as closed mine sites or defunct industrial areas to new productive uses. Land reclamation differs from rehabilitation, which involves restoring land to its natural state after it has been damaged or degraded. 

Understanding Reclamation

Reclamation is the process of reclaiming property or payment if a counterparty to a deal doesn't deliver on their part of the agreement. In the securities industry, reclamation is minimized by cutting down the chances of bad delivery. This has been largely achieved by the modern system of registering and transferring securities in book or electronic form rather than exchanging paper certificates.

Foreclosure as Reclamation

The foreclosure process is an example of reclamation. In this case, the lending institution reclaims ownership of a real estate property when the buyer defaults on a mortgage repayment obligation.

Repossession of property is also an example of reclamation. A car is a form of collateral that secures a car loan. If you do not pay the loan, the lender can reclaim the car. In the same way, an investor has the right to reclaim invested capital if delivery of the underlying security is not done properly.

Reclaiming Property via Escheatment

Property such as a dormant bank account is considered to be legally unclaimed beyond a certain dormancy period. The dormancy period is the length of time between when a financial institution reports an account or asset as unclaimed and when the government deems that account or asset to be abandoned.

After this period, dormant accounts become unclaimed property. States have escheatment statutes that govern the process of protecting unclaimed funds from reverting to the financial institutions that hold them. These laws require companies to transfer unclaimed property from dormant accounts to the state general fund. The state then takes the responsibility for record-keeping and returning lost or forgotten property to owners or their heirs.

Owners can recoup unclaimed property by filing an application with the state at no cost or for a nominal handling fee. Because the state keeps custody of the unclaimed property in perpetuity, owners can claim their property at any time.

Other Assets that Can Be Reclaimed

There are a number of other types of assets that are subject to reclamation. Most involve property that has been abandoned by some mishap. Uncashed payroll checks, unclaimed CDs and IRAs, unpaid life insurance proceeds, court awards, and even state tax refunds are all subject to loss and reclamation by their rightful owners or heirs. All are also subject to escheatment. There is usually no time limit on the right to reclamation.

Reclamation of Federal Funds

The government has a reclamation process used to recoup payments of Social Security and other types of benefits if they are not returned after the death of the beneficiary. This process is usually conducted between the U.S. Treasury and the financial institution that processes the payment for beneficiaries.

How to Reclaim Property

Every state has its own laws regarding the reclamation of lost or abandoned assets. There is no centralized resource for searching for lost property.

In most cases, the website of the office of the state comptroller is the best place to start a reclamation process. The process of reclamation generally involves filing an application with a state agency.