Changes made late last year to the state’s abandoned property law now afford business and property owners and managers an appeals process with the treasurer’s office, but some in the industry warn those changes will be accompanied by stricter enforcement of the laws, which could affect balance sheets and budgets across Massachusetts.

Morris N. Robinson, a Wellesley-based attorney familiar with the legislation, said that businesses that are not already keeping detailed records on abandoned property should start doing so, in case state auditors come to collect it.

“It’s a big deal because the treasurer’s office is going to be enforcing [the law], and they’re going to be hiring outside auditors to do it,” said Robinson, who was a member of the Associated Industries of Massachusetts Tax Committee, which was one of several groups that worked on the passage of the amended law.

While agreeing that abandoned property should be turned over to its rightful owner, Morrison said his concern lies in cases where accurate records are not kept, and state auditors use estimates to determine the amount of abandoned property that is owed to the commonwealth.

“[Treasurer Shannon O’Brien] says she is looking to return money to its rightful owner, and she is definitely trying to do that, but if a business comes up owing $20,000 in abandoned property for the past three years, the office could estimate they owe another $20,000 for the three years before that,” he said. “That last batch is never returned to anyone, because we don’t know who it belongs to. They’re only going by historical standards.”

The definition of abandoned property is broad, and includes all tangible and intangible property whose owner is not known. Examples include unclaimed gift certificates, payroll checks, jewelry, and money in inactive bank accounts. Abandoned property also includes such items as abandoned security deposits that tenants may leave behind when they move, as well as other property.

“If you have a renter in an apartment, and suddenly the renter dies or disappears and does not leave a forwarding address – whatever the case may be – all that property left behind is the responsibility of the [property management] company. They’re the holder,” Robinson said.

“Similarly, any deposits that company might have taken, if that is not paid over to the tenant, that becomes abandoned property as well,” he continued.

In the case of leftover security deposits, Robinson said auditors would look in the miscellaneous income portion of a management company’s budget to find how much abandoned property the company is holding on to.

“If the company is smart and honest, they’ll report it as miscellaneous income,” he said. “Or, they might just put it in their back pocket, and if the tenant ever shows up, they’ll just give him back his $1,200. I’m sure both cases happen.”

A spokesman for O’Brien’s office said the overwhelming majority of funds that fill the state’s abandoned property coffers while the office searches for the rightful owners comes from banks and other financial companies that turn over inactive accounts. Therefore, the state would likely not devote a high percentage of auditors to looking at property owners and management companies looking for security deposits.

He did, however, say that property owners and managers are subject to the same laws as other businesses, and they are still responsible for turning over abandoned property to the state.

He declined to confirm whether his office would specifically step up auditing efforts now that the laws have been amended.

“We trying to work with the different business groups out there,” said Communications Director Dwight Robson, explaining that his office has held seminars that explain the new regulations to business owners. “We’re really hoping to reach out to the business community. We place an emphasis on looking at the changes, then making sure we inform the community, then we move on from there.”

Among some of the changes, he said, is a two-part appeals process that previously was not in place. Under the old law, if a business did not agree with the amount the state determined was owed to the treasury as abandoned property, the only recourse was to take the appeal to court, which could prove costly in terms of legal fees, time and other expenses. Business can now first appeal to the assistant state treasurer of abandoned property, and from there can take the appeal to the state treasurer or her appointee. The option of going to court remains once both appeal attempts have been exhausted.

The state is also this year offering a six-month amnesty period for business and property managers to turn over abandoned property. The amnesty period forgives penalties – which include the per diem cost of the audit that currently runs at $150 per day per examiner – as well as fines and interest that would otherwise be assessed under the law. Interest rates currently stand at 12 percent per year. The amnesty period begins May 6, 2001.

“If you have a large management company, [abandoned property problems] do happen,” said Robinson, who is with the law firm of Robinson, Karp, Davis & Rosenblum. “If you’re managing a thousand units, a certain amount of people will just walk away and leave their deposits behind … It’s a problem, at least for the larger [companies], that’s for sure.”

According to the treasurer’s office, $108,919 in unclaimed security deposits was turned over to the state in 1999 and 2000.

Eighteen of those deposits were for more than $1,000 each and belonged mostly to businesses. Most of the unclaimed deposits during that two-year period, however, belonged to individuals and totaled less than $1,000 each.

Revenue Source?
As for smaller properties, the abandoned property problem exists, though it hasn’t dominated property owner concerns thus far.

“It’s not one of our top priorities … but I’m sure it happens to all of us at one time or another,” said Lenore Schloming, president of the Cambridge-based Small Property Owners Association. She added that when there is a case of abandoned property, it is more often items in the apartment itself than money.

“They abandon their belongings, and it’s usually a pain,” she said. “People pack and leave, and sometimes there’s a problem if they leave furniture behind, but I’m sure it’s rare that people don’t come back for a security deposit.”

Robinson added that property owners who may be immigrants not wholly familiar with the law may be at risk of not complying, and tenants who may be unfamiliar with the law also add to the problem of abandoned property.

He added that he expects the state to step up its collection efforts because of the potential revenue for the state.

“The money’s out there,” he said, adding that the compliance rate with turning over abandoned property is only about 10 percent. “If you have no new taxes, and even an income tax reduction in the next few years, and you have something that brings in new money but only has a 10 percent compliance rate, you tend to look to that for revenue,” he said. “The net to the state is about $25 million a year with a 10 percent compliance rate. I’m sure they hope to up their revenue. By how much? It’s hard to know.”