Art Collectors: Know Your Legal Rights

Like walking on water, collecting art and antiques requires a lot of faith. One has to trust one's tastes, the dealer and the market. Still, collectibles are not a religion, but commodities.
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Like walking on water, collecting art and antiques requires a lot of faith. One has to trust one's tastes, the dealer and the market. Still, collectibles are not a religion, but commodities whose buying and selling is increasingly being regulated through a growing body of legislation and case law. Consumers need to be aware of their rights and ability to negotiate better deals for themselves.

One of the major legal provisions is that an object has to be what the dealer says it is -- known as the warranty of authenticity. Fakes and forgeries as well as objects that are misattributed (for instance, a "Rembrandt" painting that was actually created by the "School of Rembrandt" or a "Follower of Rembrandt") must be taken back by the dealer, if the sale were based on the items being authentic, for the money paid for them. There would be no warranty if the dealer hazarded a guess or opinion as to the work's attribution but only if it were stated as fact.

Returning a misattributed work for one's money has become a standard practice with dealers, except where there is a dispute over what was said about an object or a disagreement over the piece's authenticity. Then, the problem may have to be resolved in a court of law.

Statute of Limitations
There may also be problems in returning an allegedly inauthentic object if the statute of limitations -- which, in most states, runs for four years beginning the date of the sale -- has expired. One instance of this involved a Massachusetts collector, Dorothy Ann Wilson, who brought suit against New York City's Hammer Galleries for selling her a painting in 1961 (for $11,500) that the gallery claimed was by French artist Edouard Vuillard but that an appraiser Mrs. Wilson hired in 1985 called a fake. The question of whether or not the picture was authentic never was resolved as a federal district judge in Boston in 1987 ruled that the statute of limitations invalidated Mrs. Wilson's suit.

Incorrect Opinions
Lawsuits occasionally have been filed when auction houses misattribute works consigned to them. However, the attribution by an auction house need not be wholly accurate if the opinion was made in good faith. An example of a legally protected mistake took place in 1998 at Christie's auction house in New York City, when EST, Inc., a Chestenham, Pennsylvania company that buys and sells artwork internationally, brought a 17th century painting entitled "The Entombment of Christ" to Christie's, and it was listed in the catalogue for its May 22, 1998 sale as by Sisto Badalocchio (1585-1620?), a pupil of and assistant to the renowned Bolognese artist Annibale Caracci (1560-1609). After the sale, which brought $12,000, EST discovered that the work was actually painted by Caracci, which would have increased the picture's worth to $300,000. A lawsuit brought by EST against Christie's was dismissed by the courts in 2001. "The only way Christie's could be liable as if it had been grossly negligent in its attribution," said Manhattan attorney Ralph Lerner. An expert's opinion -- even when wrong -- is protected as long as it was given in good faith, that is, when there was no intention to defraud, no bad faith or no conflict of interest. Experts won't provide a good faith opinion if good faith opinions aren't protected.

Proper Transfer of Title
Another area of law that may, however, lead to litigation involves the proper transfer of title. A dealer must either own the work or be empowered to sell it, but complications may arise where a stolen object comes onto the market. Often, works pass through a variety of hands before they are discovered to have been stolen, and a chain of lawsuits may result when the last owners demand the money paid for the objects from the previous ones.

One such legal domino game occurred in 1969 when Erna Menzel discovered that a Chagall painting she had left behind in her native Belgium, when she fled that country in 1940 for the United States in the wake of the invading Nazi armies, turned up in the collection of Albert List, a New York City collector.

The Nazis had confiscated the painting which, after a few sales, came into the hands of a Parisian art dealer who sold it to List. The suit by Menzel against List was relatively straight-forward, involving proof of her previous ownership, although the courts subsequently had to decide whether or not List should be reimbursed for what he had originally paid the dealer for the work ($4,000) or its then current fair market value ($22,500). List received the larger amount.

The statute of limitations may also apply to collectors whose works are stolen, for one must report the loss within one year of the theft to the police. Failure to do so may result in being unable to recover it. When painter Georgia O'Keeffe (1887-1986) neglected to inform the police of the theft of one of her works for 25 years (in fact, she hadn't noticed that it was missing), she found the courts unsympathetic after suing to regain the picture -- which turned up in another person's collection -- and was forced to make a settlement.

Print Disclosure Laws
Fourteen states around the country -- Arkansas, California, Georgia, Hawaii, Illinois, Iowa, Maryland, Michigan, Minnesota, North Carolina, New York, Oregon, South Carolina and Wisconsin -- have print disclosure laws that require dealers to tell prospective buyers the medium (such as engraving, etching, lithograph, serigraph or photographic reproduction), whether or not the graphic work they are purchasing is part of a limited edition and the size of the edition (and the number of any proofs), as well as if the printing plate is still in existence and can be used to print other editions, if any previous editions of the image have been created and the printer's name and address. Increasingly, print collectors in other states are asking dealers for much the same information in writing, and a growing number of print publishers are attaching certificates with this information to each work they run off. The California law requires the seller to provide a certificate of authenticity, attesting to these points -- without the certificate, the print may not be saleable. If any of the information on the certificate is found to be erroneous, the seller is liable for three times the purchase price.
New York State's law was amended in 1991 to include cast sculpture priced over $1,500. The seller must disclose in writing the name of the artist, the work's title, the name of the foundry or person who produced the work (if known), the medium or process, the work's dimensions, whether or not the artist is deceased and if the cast is (or was) authorized by the artist or the artist's estate. In addition, the seller is required to state the date of the edition and the size of any prior edition, whether or not the work is numbered (and how) and if any excess casts (or proofs) have been produced and how they are numbered.

In most of the 14 states, the legislation only refers to graphic prints and not to sculpture and photographs, which also are frequently created as multiples. It is not uncommon for editions of photographs to be printed at different sizes (for example, 4"x5" and 8"x10") and on different papers (silver or platinum are common types), with the same image published in different ways but always in limited editions.

Indian Arts and Crafts Act
A federal statute, the Indian Arts and Crafts Act of 1990, looks to protect buyers of Native American objects by requiring that the artists be certified by their tribes in order to prove that they are "authentic Indians." Sellers of these objects face a fine up to $1 million for violations of the law, and uncertified artists may be penalized up to $250,000 and face a five-year jail term.

Beyond this point, laws tend not to define generally accepted conduct, and agreements must be negotiated between collectors and dealers. Some dealers will agree to buy back any work they sell to a collector for the original price within a certain period of time, providing the piece is not damaged in the meantime, and others will permit prospective buyers to take an object home with them to see if they like it. Still others will allow a collector to take possession of a piece and not have to begin paying for 90-120 days.

"In some cases, a dealer will let a collector trade one work for another," Gilbert Edelson, administrative vice-president of the Art Dealers Association, said. "I've even heard of instances where jewelry is used in a trade. Everything is OK as long as both parties agree."

There may be other areas, however, where the respective interests do not so easily coincide. Dealers may be reluctant to discuss the amount of restoration -- which includes overpainting and repainting -- that has been done to a picture or painted furniture or repair work done on a ring, for instance. Collectors should always ask questions, especially for objects of 100 years or older. It is increasingly rare to find a painting, for instance, from the 19th century or earlier that hasn't been "touched up" somewhere along the way, and conservation standards were far less rigorous about not doing anything that couldn't be undone by the next restorer in the past than they are today.

There are other concerns for collectors when they seek to sell an object through a dealer. One is that the dealer agree in writing (usually on the consignment agreement) to insure the piece for its full market value and pay all restoration costs in case of damage. A collector may also choose to make a legal claim against the dealer in the event of damage that diminishes the value of the object.

No customary percentage exists in the trade for the dealer's commission -- it may range from 10 to 50 percent, depending upon the value of the piece, its rarity and the stature of the creator. A very rare piece or one done by a well-known artist might put the collector-consignor in a better position to demand a lower commission than a work that is not likely to sell as easily or for as much money.

It is also wise to see the sales receipt for the consigned work after it is sold in order to ensure that the dealer has not taken too high a commission or paid the consignor too little. Many galleries are notoriously poorly financed operations that often use today's sale to pay yesterday's debt, and many artists have had to find recourse in the courts when a dealer withheld money owed to them. Forty-six states around the country have enacted laws that protect an artist-consignor's works from being seized by creditors if the gallery should go bankrupt.

However, these laws do not apply to ordinary collectors who consign their objects to a gallery, but a financing statement -- agreed upon and signed by both collector and dealer, will offer the needed protection. Another recourse is to file a UCC-1 form for works on consignment (available in the County Clerk's office, requiring a nominal filing cost), which stipulates that the consignor has a prior lien on his or her own works in the event that the gallery has to declare bankruptcy. In the event that one's dealer disappears in the face of numerous creditors and leaves a warehouse full of art, the law permits consignors who have filed the UCC-1 form to retrieve their work.

Collectors, of course, have other options as well, including buying directly from artists, which may be less expensive as there is no dealer commission, or from auction houses. Many of the same laws and negotiating concerns apply, although an unusual situation may arise.

Miscellaneous Problems
It probably did not occur to the wife of cosmetics magnate Max Factor to ask if the artist Frank Stella would ever paint the very same picture that she was buying from him. She discovered that the artist had done so when she brought her Stella (called "Marquis de Portago") to auction and learned that the painting existed elsewhere. The result was a suit that found the artist at fault but that the collector had not suffered any monetary damages. Grandma Moses (who, in order to double her income, occasionally sawed paintings in half) had also been sued for a similar cause.

There are a lot of questions collectors should ask, and it is their knowledge of the issues that will protect their rights and maintain their faith in buying art and antiques as an enjoyable activity.

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