Escheat

Escheat

[es-cheet]
Escheat is a common law doctrine that operates to ensure that property is not left in limbo and ownerless. It originally referred 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 feudal lord.

Most common-law jurisdictions have abolished the concept of feudal tenure of property, and so the concept of escheat has lost something of its meaning. Even in England and Wales, where escheat still operates as a doctrine of land law, there are unlikely to be any feudal lords to take property on an escheat, so that in practice the recipient of an escheated property is The Crown.

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, 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.

In some jurisdictions, escheat can also occur when an entity (such as a bank) holds money or property (such as an account in that bank) and the property goes unclaimed. In many jurisdictions, if the owner cannot be located, such property can be revocably escheated to the government.

In business, it is the process of turning over unclaimed or abandoned payroll checks to a state authority (US). Every company is required to file unclaimed property reports with state annually and to make a good-faith effort to find the owners of their dormant accounts. The escheating criteria are driven by individual state regulations.

Origins in feudalism

In feudal England, escheat referred to the situation where the tenant of a fief died without an heir or committed a felony. The fief reverted to the King's ownership for one year and one day, by right of primer seisin, after which it reverted to the original lord who had granted it. From the time of Henry III, the monarchy took particular interest in escheat as a source of revenue.

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 learning the death of a tenant, the escheator would hold an "inquisition" to learn if the king had any rights to the land. If there was any doubt, the escheator would seize the land and refer the case to Westminster where it would be settled, ensuring that not one day's revenue would be lost. This would be a source of concern with land owners when there were delays from Westminster.

English common law

Thus, under English common law, there were two main ways an escheat could happen:

  1. A person's property escheated if they were convicted of a felony (other than treason, when the property was forfeited to the Crown). If the person was executed for the crime, their heirs were ineligible to inherit. (In most common-law jurisdictions, this type of escheat has been abolished outright. For example, the rule has been abolished in the United States under _Treason of the United States Constitution, which states that attainders for treason do not give rise to posthumous forfeiture, or "corruption of blood".)
  2. If a person had no heirs to receive their property under a will or under the laws of intestacy, then any property that they owned at death would escheat. (Again, this rule has been replaced in most common-law jurisdictions by bona vacantia or a similar concept.)

Escheat can still occur in England and Wales, if a person is made bankrupt or a corporation is 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 disclaiming it. It is relatively common for a trustee in bankruptcy to disclaim property where freehold property (such as the common parts of a block of flats) would ordinarily pass to the trustee to be realised in order to pay the bankrupt's debt, but the property is, for example, split into leased flats which give the landlord an obligation to spend money. The bankruptcy of the original owner means that the freehold is no longer the bankrupt's property, but the disclaimer destroys the freehold estate, so that the land ceases to be owned by anyone and becomes 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 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.

One consequence of the Land Registration Act 1925 was that only estates in land (freehold or leasehold) could be registered. Land held directly by the Crown, known as property in the "Royal Demesne" is not held under any feudal tenure and there is therefore no estate to register. This has had the consequence that freeholds that escheated to the Crown ceased to be registrable. This created a slow leak 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.

References

  • S.T. Gibson, "The Escheatries, 1327-1341", English Historical Review, 36(1921).
  • John Bean, The Decline of English Feudalism, 1215-1540, 1968.

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