Georgia Leach, Trainee, is a co-author on this article
Art is a passion asset. Collectors may purchase art solely as an investment but frequently they are also driven by emotional factors, such as their enthusiasm for and connection to an artist or artwork, their desire to build a profile as a collector or perhaps even their rivalry with a fellow collector. Consider the frenetic bidding over Salvator Mundi, attributed to Da Vinci, which led to its sale in 2017 for four times the pre-sale estimate. Consequently, buyers may not apply a ‘business’ mindset when purchasing art which can mean they later find themselves holding an asset which is not what they thought it to be or, potentially worse, embroiled in costly legal disputes over a purchase.
If you are buying a piece of art, we have set out some key considerations below.
1. Have you verified the provenance and attribution of the works?
Checking the ownership history (provenance) of the work, and that it is actually attributed to the artist it is being sold as, are critical steps every buyer should take before a purchase. If buying from a reputable art dealer or auction house, you may assume, or be told, that there are no concerns as to provenance or attribution. However, it is always important to do your own checks to ensure that there are no gaps in the ownership history or suspect transactions which could lead to complex moral and legal questions at a later stage which may affect the works resale or insurance value.
Gaps in ownership history may mean the work was unlawfully removed from a previous owner in the past in times of conflict. The restitution of artworks which have been stolen, looted or otherwise removed from the rightful legal owner is a concern if, for example there is a gap provenance during the period 1933 to 1945 during the Nazi era. The UK is a signatory to the Washington Principles on Nazi-Confiscated Art, which provides non-binding but widely recognised principles to ensure that artworks stolen or forcibly removed during the Nazi era and World War II are returned to their rightful owner.
The other important historic check to conduct is that the artwork has been correctly imported and exported throughout its life and the seller is able to provide full paperwork to verify that there are no potential underlying claims. This issue has particularly arisen with pieces bought from Africa, China and the Middle East – stories abound of such artworks being smuggled out of the country of origin in the bottom of a suitcase and, for the avoidance of doubt, that does not constitute valid export. The country of origin can, quite rightly, demand the piece back as a part of their cultural heritage.
Attribution is a trickier issue. Proving a work is actually by the artist to whom it is attributed often relies on the opinion of experts in the field and/or whether it appears in a catalogue raisonné for the artist. If it is in the catalogue, unless subsequently proven to be forgery, the attribution is usually accepted. If it is merely the opinion of experts, as was the case in Salvator Mundi, it is later open to challenge.
Lawyer’s tip: Be wary of deals that are ‘too good to be true’, or sellers who purport to have special relationships with local authorities negating the need for paperwork.
A useful starting point is to check the Art Loss Register which is a database of artworks reported stolen or looted. This basic check can avoid a lot of expensive heartache in future. The Interpol red list should also be checked for international works that are reported stolen/missing.
If you find yourself holding an artwork subject to a restitution claim, mediation is a key approach to consider early on to avoid the dispute becoming public and causing damage to your reputation or the value of the artwork. It may be necessary to instruct a lawyer to ensure you are not left out of pocket.
2. Do you know the terms of the contract?
Contracts can be written or oral, so it is important to keep a record of what terms you have agreed with the seller – a binding contract can be made on a handshake. In the case of a sale agreed on a handshake, in England and Wales such contracts have terms that are implied by statute where the parties have neglected to address a certain aspect in their agreement, for example, the transfer of risk or the timing of delivery. If the seller is a business, its Terms & Conditions (which could be attached to an invoice or simply available on their website) may additionally govern the terms of your contract. The greater the detail on the terms of the contract the better.
Lawyer’s tip: You and the seller should be very clear as to what are the terms of the contract and make sure they are in writing so that they are clear and unequivocal. Parties typically fail to explicitly agree the terms of delivery, payment and insurance, which can lead to unintended and unsuitable terms being implied into the contract by statute or previous dealings.
3. Who is responsible for damage? Understanding when risk transfers
Risk is one of the biggest issues when buying or selling art and, where an artwork is damaged (for example, in transit), whether it was at the seller’s or buyer’s risk at the time is frequently a contentious point. It is for the party who is on ‘risk’ to insure the piece.
If you are buying an artwork as an individual, risk passes when the artwork comes into your physical possession. However, if you are buying the artwork through a business, risk will usually pass with title, unless the parties agree otherwise. The starting point is that title is transferred when the parties intend it to be transferred.
If left unaddressed, title (and therefore risk) may pass at the time the contract is made, creating practical difficulties for both parties. For example, the seller may only have insurance which covers artworks it still owns or artworks consigned to it. If risk and title pass at the point of sale, the need to insure passes to the buyer who may not realise risk has passed.
Lawyer’s tip: It is vital that you agree this point with the seller so that both parties are aware of when risk will pass. As the buyer, you will need to ensure that the artwork is added to your existing insurance, or that you get appropriate insurance, at the correct time.
4. Art delivery terms: protect yourself from delays and disputes
As with risk, if there is no clear agreement between the parties on the terms of delivery, statute can imply terms into the contract. If you are buying in an individual capacity, an artwork must be delivered ‘without undue delay’ or in any event within 30 days after the contract is made. However, if you are buying through a business, the position is more complex.
When buying under a business, unless otherwise agreed, the seller is bound to deliver the goods ‘within a reasonable time’. What is ‘reasonable’ depends on the facts; all the circumstances may be taken into account by the court, including factors which may only be known with hindsight.
The legal definition of delivery is ‘the voluntary transfer of possession from one person to another’. Delivery to a carrier or shipper may amount to a ‘delivery’ under law – you do not need to have physical possession of an artwork for it to be ‘delivered’.
Lawyer’s tip: Again, this may not appear to be a particularly contentious issue – however, what about highly valuable, bulky or delicate artworks, or pieces which are difficult to install? As a buyer, you may find yourself in a difficult situation when the terms of delivery have not been sufficiently specific or clear (for example, one anecdotal story of a multi-million-pound painting being left on the buyer’s doorstep by an inexperienced courier).
5. Avoid insurance pitfalls when buying art
In practice, artworks are often held by sellers for some time after the sale has taken place. You should have a clear agreement with the seller as to who is insuring the artwork at all points in the transaction. If there are two (or more) policies insuring the same artwork, this could lead to the complex issue of ‘dual insurance’. Insurers may refute their obligation to cover the artwork if another policy applies, or a dispute regarding the proportion of contribution may arise between the insurers. Either way, any recovery on a lost or damaged artwork may be significantly delayed, reduced or not paid out at all.
Lawyer’s tip: As a buyer, you must have clarity as to how the artwork is being insured at every point of the transaction. You must also ensure that while the artwork is insured by the seller, your interest is noted by the insurer and the artwork is insured for an appropriate amount. The price at which the seller purchased the artwork may be too low a threshold from your perspective as the buyer.
In short, the world of purchasing art can be fraught with legal difficulties and yet, often, very valuable artworks are purchased with little knowledge about the work beyond a short description in a catalogue and on the contractual strength of a handshake. It would be a rare person indeed who felt comfortable purchasing a house for millions of pounds without taking legal advice and yet it is more common to find them spending the same amount on an artwork with little or no qualms. The best advice we can give is to treat any purchase of substantial value the same way you would a house purchase – consult lawyers to understand how it will work and how you can best be protected. Failing that, understand the law and the terms which apply to the purchase of any artwork before you sign on the dotted line or shake hands.
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