View source for Escheat

{{Short description|State taking ownership of 'unowned' land}}
{{Use British English|date = January 2019}}
{{Use dmy dates|date = January 2019}}
{{Globalize|article|[[England and Wales]]|date=December 2017}}
{{Property law}}
'''Escheat''' {{IPAc-en|ᵻ|s|ˈ|tʃ|iː|t}}<ref>{{cite web|title=Escheat|url=http://howjsay.com|access-date=2 November 2011}}</ref><ref>{{cite book|last=Walker|first=John|title=A Critical Pronouncing Dictionary and Expositor of the English Language|year=1838|publisher=Adegi Graphics LLC |url=https://books.google.com/books?id=gO97flqb_-cC&q=pronounce%20escheat%20english&pg=PR1|isbn=9781402171710}}</ref> ({{ety|la|excidere|fall away}}) is a [[common law]] doctrine that transfers the [[real property]] of a person who has died without heirs to the [[The Crown|crown]] or [[State (polity)|state]]. It serves to ensure that property is not left in "limbo" without recognized ownership.  It originally applied to a number of situations where a legal interest in land was destroyed by [[operation of law]], so that the ownership of the land reverted to the immediately superior [[feudalism|feudal]] lord.

==Etymology==
The term "escheat" derives ultimately from the Latin ''ex-cadere'', to "fall-out", via mediaeval French ''escheoir''.<ref>Collins Dictionary of the English Language, London, 1986, p.520</ref> The sense is of a feudal [[estate in land]] falling-out of the possession by a tenant into the possession of the lord.

"Escheat" may also, rarely, be referred to by the shortened form "cheat". The common term "[[cheat]]" for unethical or rule-breaking behavior evolved from this term, although the legal term does not carry any of that meaning.<ref>{{cite web | title=Cheat - Etymology, Origin & Meaning | url=https://www.etymonline.com/word/cheat }}</ref>

==Origins in feudalism==
In feudal England, escheat  referred to the situation where the tenant of a [[fief|fee]] (or "fief") died without an heir or committed a [[felony]]. In the case of such demise of a [[tenant-in-chief]], the fee reverted to the King's [[demesne]] permanently, when it became once again a mere tenantless plot of land,  but could be re-created as a fee by enfeoffment to another of the king's followers. Where the deceased had been [[subinfeudation|subinfeudated]] by a tenant-in-chief, the fee reverted temporarily to the crown  for [[Year and a day rule|one year and one day]] by right of ''[[seisin|primer seisin]]'' after which it escheated to the  over-lord who had granted it to the deceased by enfeoffment. From the time of [[Henry III of England|Henry III]], the monarchy took particular interest in escheat as a source of revenue.

===Background===
At the [[Norman Conquest]] of England in 1066, all the land of England was claimed as the personal possession of [[William the Conqueror]] under [[allodial title]]. The monarch thus became the sole "owner" of all the land in the kingdom, a position which persists to the present day. He then granted it out to his favoured followers, who thereby became [[tenant-in-chief|tenants-in-chief]], under various contracts of [[feudal land tenure]]. Such tenures, even the highest one of "[[English feudal barony|feudal barony]]", never conferred ownership of land but merely ownership of rights over it, that is to say ownership of an [[estate in land]]. Such persons are therefore correctly termed "land-holders" or "tenants" (from Latin ''teneo'' to hold), not owners. If held freely, that is to say by [[Freehold (law)|freehold]], such holdings were heritable by the holder's legal heir. On the payment  of a premium termed [[feudal relief]] to the [[treasury]], such heir was entitled to demand [[enfeoffment|re-enfeoffment]] by the king with the [[fief|fee]] concerned.

Where no legal heir existed, the logic of the situation was  that the fief had ceased to exist as a legal entity, since being tenantless no one was living who had been enfeoffed with the land, and the land was thus technically owned by either the crown or the immediate overlord (where the fee had been [[subinfeudated]] by the [[tenant-in-chief]] to a [[mesne lord]], and perhaps the process of subinfeudation had been continued by a lower series of mesne-lords) as ''[[ultimus haeres]]''. Logically therefore it was in the occupation of the crown alone, that is to say in the royal [[demesne]]. This was the basic operation of an escheat ('excadere'), a failure of heirs.

Escheat could also take place if a tenant was outlawed or convicted of a felony, when the King could exercise the ancient right of wasting the criminal's land for a year and a day, after which the land would revert to the overlord. (However, one guilty of treason (rather than mere felony) forfeited all lands to the King. John and his heirs frequently insisted on seizing as ''terrae Normannorum'' (i.e. "lands of the Normans") the English lands of those lords with holdings in Normandy who preferred to be Normans rather than Englishmen, when the victories of [[Philip II of France]] forced them to make a proclamation of allegiance to France.)  Since disavowal of a feudal bond was a felony, lords could escheat land from those who refused to perform their feudal services.  On the other hand, there were also tenants who were merely sluggish in performing their duties, while not being outright rebellious against the lord.  Remedies in the courts against this sort of thing, even in [[Henry de Bracton]]'s day, were available, but were considered laborious and were frequently ineffectual in compelling the desired performance.  The most common mechanism was [[distraint]], also known as distress (districtio), whereby the lord would seize chattels or goods belonging to the tenant, to hold until performance was achieved.  This practice had been addressed in the 1267 [[Statute of Marlborough]].  Even so, it remained the most common extrajudicial method applied by overlords at the time of ''[[Quia Emptores]]''.<ref>Pollock and Maitland, History of English Law, Vol 1, pp.&nbsp;355–366, Cambridge University Press, 1968</ref>

Thus, under English common law, there were two main ways an escheat could happen:
# A person's lands escheated to the immediate overlord if he was convicted of a [[felony]] (but not [[treason]], in that event the land was [[Asset forfeiture|forfeit]]ed to the Crown).  If the person was [[capital punishment|executed]] for felony, his heirs were [[Attainder|attainted]], i.e. were ineligible to inherit. In most common-law jurisdictions, this type of escheat has been abolished outright, for example in the [[United States]] under [[Article Three of the United States Constitution#Section 3: Treason|Article 3 § 3]] of the [[United States Constitution]], which states that [[bill of attainder|attainders]] for [[treason]] do not give rise to posthumous forfeiture, or "corruption of blood".
# If a person had no [[heir]] to receive his lands under his [[Will (law)|will]], or under the laws of [[intestacy]], then any land he owned at death would escheat. This rule has been replaced in most common-law jurisdictions by ''[[bona vacantia]]'' or a similar concept.

==Procedure==
From the 12th century onward, the Crown appointed ''escheators'' to manage escheats and report to the [[Exchequer]], with one escheator per [[county]] established by the middle of the 14th century. Upon  the death of a tenant-in-chief, the escheator would be instructed by a writ of ''diem clausit extremum'' ("he has closed his last day", i.e. he is dead) issued by the king's [[Court of Chancery|chancery]], to empanel a jury to hold an "[[Escheat roll|inquisition ''post mortem'']]" to ascertain who the legal heir was, if any, and what was the extent of the land held. Thus it would be revealed whether the king had any rights to the land. It was also important for the king to know who the heir was, and to assess his personal qualities, since he would thenceforth form a constituent part of the royal army, if he held under [[feudal land tenure|military tenure]]. If there was any doubt, the escheator would seize the land and refer the case to the king's  court where it would be settled, ensuring that not one day's revenue would be lost. This would be a source of concern with land-holders when there were delays from the court.

==Current operation==
[[File:Jury finding Kentucky County Virginia John Connolly Daniel Boone 1780.jpg|thumb|Jury finding from [[Kentucky County, Virginia]] County Court from an inquest of escheat. A twelve-man panel adjudged John Connolly and Alexander McKee to be [[British citizen]]s within the meaning of the Virginia Assembly Act of 1779 concerning British subjects and their rights under Virginia law. (The Assembly had seized Connolly's claims prior to the inquest.) The jury found that the lands of Connolly and McKee were [[Forfeiture (law)|forfeited]] as they were British (and not American) citizens. [[Daniel Boone]] was listed as member of jury. (July 1780)]]

Most common-law jurisdictions have abolished the concept of [[feudal land tenure]] of property, and so the concept of escheat has lost something of its meaning. In [[England and Wales]], the possibility of escheat of a deceased person's property to the feudal overlord was abolished by the [[Administration of Estates Act 1925]]; however, the concept of [[Unowned property|''bona vacantia'']] means that the Crown (or [[Duchy of Cornwall]] or [[Duchy of Lancaster]]) can still receive such property if no-one else can be found who is eligible to inherit it.

The term is often now applied to the transfer of the title to a person's property to the state when the person dies [[intestate]] without any other person capable of taking the property as [[heir]]. For example, a common-law jurisdiction's intestacy statute might provide that when someone dies without a [[Will (law)|will]], and is not survived by a spouse, descendants, parents, grandparents, descendants of parents, children or grandchildren of grandparents, or great-grandchildren of grandparents, then the person's estate will escheat to the state.

Similarly, under [[Napoleonic law]], if someone dies intestate without natural heirs then, after all creditors are paid, any remaining real and personal goods are inherited by the State.

In some jurisdictions, escheat can also occur when an entity, typically a bank, credit union or other financial institution, holds money or property which appears to be  unclaimed, for instance due to a lack of activity on the account by way of deposits, withdrawals or any other transactions for a lengthy time in a cash account.  In many jurisdictions, if the owner cannot be located, such property can be revocably escheated to the state.

In commerce, it is the process of reassigning legal title in unclaimed or abandoned payroll checks, insurance payouts, or stocks and shares whose owners cannot be traced, to a state authority (in the United States). A company is required to file unclaimed property reports with its state annually and, in some jurisdictions, to make a good-faith effort to find the owners of their dormant accounts.  The escheating criteria are set by individual state regulations.

===England and Wales===

====Bankruptcies and liquidations====
Escheat can still occur in [[England and Wales]], if a person is made [[bankrupt]] or a [[corporation]] is [[liquidation|liquidated]]. Usually this means that all the property held by that person is 'vested in' (transferred to) the [[Official Receiver]] or [[Trustee in Bankruptcy]]. However, it is open to the Receiver or Trustee to refuse to accept that property by [[disclaimer|disclaiming]] it. It is relatively common for a trustee in bankruptcy to disclaim freehold property which may give rise to a liability, for example the common parts of a block of [[Apartment|flats]] owned by the bankrupt would ordinarily pass to the trustee to be realised in order to pay his debts, but the property may give the landlord an obligation to spend money for the benefit of lessees of the flats. The bankruptcy of the original owner means that the freehold is no longer the bankrupt's legal property, and the disclaimer destroys the freehold [[Estate (law)|estate]], so that the land ceases to be owned by anyone and effectively escheats to become land held by the Crown in [[demesne]].  This situation affects a few hundred properties each year.

Although such escheated property is owned by the Crown, it is not part of the [[Crown Estate]], unless the Crown (through the [[Crown Estate Commissioners]]) 'completes' the escheat, by taking steps to exert rights as owner. However, usually, in the example given above, the tenants of the flats, or their [[mortgage law|mortgagees]] would exercise their rights given by the [[Insolvency Act 1986]] to have the freehold property transferred to them. This is the main difference between escheat and ''bona vacantia'', as in the latter, a grant takes place automatically, with no need to 'complete' the transaction.

====Registration of Crown land====

One consequence of the [[Land Registration Act 1925]] was that only [[Estate in land|estates in land]] (freehold or leasehold) could be registered. [[Crown land]], i.e., land held directly by the Crown – also known as property in the ''royal [[demesne]]'' – is not held under any residual feudal tenure (the Crown has no historical overlord other than, for brief periods, the [[Pope|papacy]]), and there is therefore no estate to register. This had the consequence that freeholds which escheated to the Crown ceased to be registrable. This created a slow drain of property out of registration, amounting to some hundreds of freehold titles in each year.

The problem was noted by the [[Law Commission]] in their report "Land Registration for the Twenty-First Century". The [[Land Registration Act 2002]] was passed in response to that report. It provides that land held in demesne by the Crown may be registered.

=== United States ===

==== Transfer agents and escheatment ====
Escheatment is the process of returning lost or unclaimed property to the government of a state, for safekeeping until the owner is identified. Geographic jurisdiction of the state is determined by the last known address of the original owner. Each [[U.S. state|state]] has laws regulating escheatment, with holding periods typically ranging around five years. The legal principle behind escheatment is that all property has a legally recognized owner. Therefore, if the original owner cannot be found within a specified time, the government is presumed to be the owner.<ref>{{Cite news|url=https://www.investopedia.com/terms/e/escheat.asp|title=Escheat|author=Investopedia Staff|date=2003-11-18|work=Investopedia|access-date=2018-01-26|language=en-US}}</ref>

Escheats are performed on a revocable basis. Thus, if property has escheated to a state but the original owner subsequently is found, escheatment is revoked and ownership of the property reverts to that original owner.

==== Lost shareholders ====
According to SEC Rule 17 CFR 240.17f-1: Transfer agents are obligated by the SEC to report to the commission (specifically to its designee; the SEC's Securities Information System) anytime a certificate is known to be lost or missing for at least two days.<ref>{{Cite web|url=https://www.law.cornell.edu/cfr/text/17/240.17f-1|title=17 CFR 240.17f-1 - Requirements for reporting and inquiry with respect to missing, lost, counterfeit or stolen securities.|website=LII / Legal Information Institute|language=en|access-date=2018-01-26}}</ref> Transfer Agents must search for the holder's SSN or EIN utilizing an information database system, or if not available, exercise their best effort to match the holder's name and address through these systems. All transfer agents must report all lost or missing certificates/shareholders on their own annual filings.<ref>{{Cite web |url= https://westcoaststocktransfer.com/escheatment |title= Escheatment |language=en |access-date= 2018-01-26}}</ref>

== See also ==
* [[Breakage (accounting)]]
* [[Doctrine of lapse]]
* [[History of the English fiscal system]]
* [[Intestacy]]
* ''[[Quia Emptores]]''
* ''[[Res nullius]]''
* [[Unowned property]] (''bona vacantia'')

==Sources==
*S. T. Gibson, "The Escheatries, 1327–1341", ''English Historical Review'', 36(1921).
*John Bean, ''The Decline of English Feudalism, 1215–1540'', 1968.

==References==
<references/>

[[Category:Common law]]
[[Category:Feudalism in England]]
[[Category:Property law]]
[[Category:Real property law]]
[[Category:Time in government]]