Handling Forfeited and Abandoned Property

By C. Christine Fillmore, Esq.

Local governing bodies and law enforcement agencies are often called upon to deal with various forms of forfeited and abandoned property. However, not all property is the same. It is important for all municipal officials to understand the different sources of this property and the ways in which municipalities can properly use and dispose of it.

Q: What are the different categories of forfeited or abandoned property?

A: The main categories are drug forfeitures, other criminal forfeitures, and abandoned property and real estate.

Drug Forfeitures: Almost any kind of property can be forfeited to the State if it is connected to illegal drug activity. RSA 318-B:17-b. The law covers any property that is “used or intended for use in procurement, manufacture, compounding, processing, concealing, trafficking, delivery or distribution of a controlled drug in felonious violation" of RSA Chapter 318-B. Forfeited property may include not only cash, but also any of the following: materials, products and equipment; aircraft, vehicles, and vessels; securities, negotiable instruments, and other investments; books, records and other data; and any interest in land or buildings. RSA 318-B:17-b, I.

The law grants the State a lien on any property subject to drug forfeiture, and much of the process is conducted by the state’s Department of Justice. Local law enforcement may become involved when the Department of Justice requests assistance with the seizure. The local seizing agency will then have the property appraised and provide the State with a report, which the State will use to determine whether or not to seek a permanent order of forfeiture. While that process is pending, local law enforcement agencies may be required to hold and secure non-cash property, and money will be transferred into an interest-bearing escrow account administered by the State Attorney General. RSA 318-B:17-b, II-a. Once a court issues a final forfeiture order, title to the property is vested in the State. The Department of Justice will hold a public sale and use the proceeds to pay all costs of the forfeiture and to clear any outstanding recorded liens on the property. However, the law also provides that the municipality whose law enforcement agency was responsible for the seizure will receive 45 percent of the first $500,000 of the balance.

Other Criminal Forfeitures: Property may also be forfeited under the law for other, non-drug related offenses. RSA Chapter 617 provides for the seizure and legal process for these forfeitures, although the process is less detailed than for drug forfeitures. Generally, local law enforcement might seize property in the course of a criminal investigation. The crime will be prosecuted by county or state authorities, and after a trial, a court may issue a decree of forfeiture in favor of the state or municipality (or other party, according to the applicable law).

Abandoned Property: Under RSA Chapter 471-C, the State handles the disposition of most private property that is deemed “abandoned." However, municipalities do have a role in handling property that is held in police department property rooms. If non-contraband abandoned or lost personal property was found by someone other than a police officer during the course of his/her usual duties, then the police may return that property to the finder (a) if the property has a value of $250 or more and has been held in a police department property room for at least 180 days, or (b) if the property has a value of less than $250 and has been held for at least 90 days. If the property cannot be returned to the finder, then it must be sold at public auction with the proceeds to be turned over to the municipal treasurer. The only exception is for bicycles, which must be sold at public auction after they have been held for 90 days. RSA 471-C:13.

Abandoned Real Estate: Whenever a town may find that real estate in that town has been abandoned or allowed to go to waste, town meeting may appropriate funds to purchase or rent the property, and to repair and improve any buildings on the property in order to get the property back into productive use. RSA 31:18. If the town votes to take this action, the property will become municipal property once the purchase has occurred.

Q: How should municipalities handle proceeds from drug forfeitures?

A: The State must distribute 45 percent of the first $500,000 of proceeds from drug forfeitures to the fiscal officer of the municipality that provided the law enforcement agency responsible for the seizure. RSA 318-B:17-b, V(a)(1). These funds must be deposited in a special account and can be spent without the need for approval by the local legislative body (that is, town meeting). However, there is one important limitation: these funds “shall be used primarily for meeting expenses incurred by law enforcement agencies in connection with drug-related investigations" and “shall not be transferred or expended for any other purpose." This means that while the funds are municipal property, their use is limited. The municipality may use the funds to pay for things such as surveillance equipment, vehicles to be used in drug investigations, and other related activities, but may not treat it as a general revenue source to fund unrelated purposes.

Q: Are there any limitations on the use of the other kinds of forfeitures or abandoned property?

A: Non-cash property that has been obtained through the general criminal forfeiture process under RSA Chapter 617 becomes municipal property and can be handled just like any other municipal property. Property like real estate, vehicles or equipment may be useful and the municipality may wish to distribute them to a certain department or use them for particular municipal purposes. Most of the time, however, forfeited property will be sold to generate cash that the municipality can appropriate for any public purpose.

Unlike drug forfeiture money, these non-drug forfeiture funds can be used for any proper municipal purpose; however, cash from other kinds of forfeiture or abandonment must also go through the usual appropriation process before it can be spent. These funds are revenue that the local legislative body must appropriate as part of a municipal budget. So, for instance, if computer equipment has been seized and forfeited under RSA 617 and the municipality has sold it at auction, those funds should be held by the treasurer and appropriated in the next budget cycle for whatever proper purpose the local legislative body chooses. The only time this process does not need to be followed is when a town meeting has voted previously under RSA 31:95-b to authorize the board of selectmen to apply for, accept, and expend unanticipated money from any source which becomes available during the year. For funds of more than $5,000, the board of selectmen will hold a public hearing with at least seven days’ notice before voting to accept or spend the money. RSA 31:95-b, III.

The proceeds from non-contraband abandoned or lost personal property that has been held by police departments and sold at auction under RSA 471-C:13 should be turned over to the municipal treasurer. These are general municipal funds that should be handled the same way as the proceeds of non-drug forfeitures. The only exception is for the proceeds of the sale of bicycles, which the law requires to be used to support bicycle safety programs. If there is no such program, then the local governing body (that is, board of selectmen) can approve its use for any other public purpose.

When a town votes to acquire abandoned real estate under RSA 31:18, it should also vote to authorize the board of selectmen to use or dispose of the property. This property can be used or disposed of for “such recreational, forestry or other purposes as the town may deem to be in the public interest, or may be sold at public auction or private sale by the selectmen or their authorized agents when in the opinion of the selectmen such sale would result in increasing the taxable valuation of the town, or be in the public interest." RSA 31:18.

Q: What about donating the property to charity instead of selling it at auction?

A: This is often expressly prohibited by statute because the applicable law dictates how the property must be disposed. For instance, cash from drug forfeitures cannot be donated to charity because the law requires municipalities to use their portion of those funds for activities related to drug investigations. RSA 318-B:17-b, V(a)(1). Abandoned property held by police departments must be sold at auction. RSA 471-C:13. Abandoned real estate acquired by a municipality must be used or sold in a manner that either increases the taxable valuation of the town or is otherwise in the public interest. RSA 31:18.

Non-cash property from other types of forfeitures is not heavily regulated by statute, and it is often only useful once it has been sold or auctioned to generate cash. Holding an auction may seem more trouble than it is worth at times, particularly if the property is not worth very much. It may seem an attractive option to donate the property to a church sale or other charitable cause.

However, one fundamental concept of municipal budgeting that applies equally to forfeited property is that of “public benefit." Municipalities may appropriate money for any public purpose, but cannot appropriate or spend public money for any private benefit. RSA 31:4. This concept commonly arises in connection with municipal services (for example, assigning municipal road crews to plow private driveways or private roads). It is just as problematic when municipal property is donated to any private cause. As a general rule, public money or property cannot be granted to a private person, company or organization, unless that private person takes on some obligation to benefit the municipality. Opinion of the Justices, 88 N.H. 484 (1937). While a church sale or other charity may be a worthy cause, this public benefit rule means that the municipality cannot donate forfeited cash or other property to those causes unless it is given in exchange for some identifiable public benefit to the municipality or its citizens.