Many states are faced with unprecedented financial pressures, and they are looking for money where they can find it. It shouldn't come as a surprise that they are looking at car dealers.
An area of government interest most overlooked by dealers is unclaimed property. States are auditing to find — and they are looking to dealers to pay into state coffers — the unclaimed property dealerships potentially hold for others.
Unclaimed Property Acts have been passed by many states as a means of reuniting an owner with his or her property. Unclaimed property is any financial asset that has been left inactive.
Common examples are savings and checking accounts, un-cashed bank checks, certificates of deposit, and safe-deposit box contents.
By law, most property becomes unclaimed and is presumed abandoned when there is no owner contact with the holder for a specified period of time, typically three to five years. It varies by state and type of property. The law requires notice to the owner of abandoned property. The property belongs to the state if it is not claimed.
Applicable To Dealers
Dealers who do not view their state Unclaimed Property Acts as applicable to them should take an opportunity to learn more about these laws. Funds resulting from uncashed checks, unclaimed refunds, overpayments and the like are not simply “pickup money” that can be swept into income at the end of the year.
Any right to property of someone the dealership deals with — usually a customer or employee — that is not claimed is in fact property subject to the state Unclaimed Property Act. There are numerous categories of potential unclaimed property that any dealership controller could easily identify. Here are the most obvious:
- Overpayments of official fees not returned to customers.
- Overpayments of lien payoffs not returned to customers.
- Refund checks not cashed by customers.
- Employee salary or bonus checks not cashed by former employees.
- Unreimbursed deposits for undelivered vehicles or parts to which the dealer does not have a legal claim under its sale documents.
- Uninstalled equipment or unperformed services due to a vehicle purchaser.
Deposits And “We Owes”
Many dealers believe that they have the right to deposits for vehicles and parts when a customer does not finalize the purchase. However, that is only the case where the sales order or other documents clearly give the dealer the right to keep a deposit as its property because of the customer's default.
Many dealers also view uninstalled equipment or unperformed services due to a vehicle purchaser as company property if not claimed by the buyer. A state auditor will disagree unless dealership documentation is drafted carefully.
A dealership that wants to avoid treating these as unclaimed property should be sure that the paperwork adequately describes the dealer's rights in the transactions.
Generally, the “we owe” given to the customer should make clear that the property does not belong to the customer unless claimed.
The form should give notice of that with language such as: “Buyer shall have no right to the equipment or work under this document if Buyer does not return the vehicle for service within 30 days. If not claimed, the equipment and/or services shall remain the property of the dealer.”
The laws vary from state to state, so dealers should consult with their legal advisors for advice about the proper language under specific state law.
Michael Charapp, an attorney with Charapp & Weiss, LLP who specializes in representing motor vehicle dealers, can be reached at (703) 564-0220 or [email protected]