What Is Reclamation?

Reclamation is the right to reclaim property in the event of dormancy, non-payment, fraud, or other irregularities. Reclamation in the financial context generally refers to the right to demand repayment of monies paid if there has been a bad delivery of a stock or security; or, to recover funds from neglected accounts. It may also refer to the right of the seller to reclaim the property and assume ownership if the buyer does not pay or fails to meet the terms of the purchase agreement.

Reclamation also refers to the process of reconverting previously unusable lands such as closed mine sites or defunct industrial areas to productive uses. Land reclamation differs from rehabilitation, which is a process of restoration to bring an area of land back to its natural state after it has been damaged or degraded, making it safe for wildlife and flora as well as humans. 

Key Takeaways

  • Reclamation involves the legal recovery of dormant or forfeited property or funds.
  • Several examples of reclamation exist in the financial context, including reclaiming neglected accounts via escheatment, recovering failed delivery of assets, or regaining ownership of foreclosed or repossessed property.
  • Land reclamation involves altering existing ecosystems for economic use to make way for cultivation or construction, often by creating new land from river beds, lake beds, and oceans.

Understanding Reclamation

Reclamation is the process whereby somebody can reclaim their property or money if the counterparty to a deal doesn't deliver on their part of the agreement. In the securities industry, reclamation can be minimized by cutting down the chances of bad delivery, which can be achieved by registering and transferring securities in book or electronic form rather than using physical certificates.

An example of reclamation is the foreclosure process, whereby the lending institution regains ownership of a real estate property if the buyer defaults on the mortgage obligations. Property repossession is also an example of reclamation. A car is collateral that secures a car loan. If you do not pay the loan, the lender can reclaim the car. An investor can reclaim their invested capital if delivery of the underlying security is not legitimate.

Reclaiming Property via Escheatment

Unclaimed property, such as dormant bank accounts, is considered to be legally unclaimed beyond a certain dormancy period. The dormancy period is the amount 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 the dormancy period, dormant accounts become unclaimed property. States have escheatment statutes that govern the process of protecting unclaimed funds from reverting them back to financial institutions. Escheatment state laws require companies to transfer unclaimed property from dormant accounts to the state general fund, which takes over record-keeping and returning of lost or forgotten property to owners or their heirs if the owner has passed away.

Owners can gain back unclaimed property by filing an application with their 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.