About the author: Hailey Widrig has been immersed in the art market for over a decade, developing in-depth art history and market expertise focusing on Post-War, Contemporary Art and Photography. At Art Partners Advisory she provides curatorial advice to collectors, corporations and institutions to build and maintain museum-quality art collections.
In my role as an art advisor specializing in Post-War and Contemporary art, I collaborate with collectors to cultivate and manage their collections. Regardless of the prestige or size of the art collection, anyone can make mistakes. I’ve seen collectors pay well over the odds for a work at auction in the heat of a bidding war, or fail to do their homework on a piece offered to them by a well intentioned interior decorator lacking art market knowledge.
This guide aims to provide a foundation of practical knowledge to implement, whether starting your collecting journey or organizing an existing collection.
By following these key points, you can steer clear of dubious transactions, avoid making costly mistakes, and hopefully feel confident when purchasing artwork.
Art Basel Miami, Florida, USA, December 4, 2016
© Mia2you/Shutterstock
Where to purchase art?
It is important to understand the distinction between primary and secondary market, as different tax formalities may apply to each category.
This depends on what you will be collecting, but most art is purchased from galleries, auction houses or directly from artists. Sources can be broken down into two categories: primary market – being the first or primary seller of the artwork – and secondary market- a reseller or second-hand seller of artworks. Galleries often deal in both categories but will generally focus in one direction, either working with living artists and developing their primary market or curating exhibitions of historical works as secondary market dealers. Commissions from artists are primary market, whereas auction sales are generally secondary market.
In the UK and EU, a royalty called the Artist Resale Right (ARR) or Droit de Suite applies to any secondary market sale, via a professional seller, of unique artworks with a value of at least £/€1000, created by a living artist, or artist who has been dead for less than 70 years, from a member state. This fee is calculated on a sliding scale and applies to the purchase price before VAT or auction fees. The amount payable is capped at £/€12,500 and is itself exempt of VAT. The concept behind the Droit de Suite, which was originally introduced in France in 1920, is to allow artists and their heirs a means to benefit from secondary market sales, much in the way a musician or author receives royalties from the use of their material.
So for example if you purchased a primary market painting by a living British artist in London via their representative gallery for £15,000, no ARR would be due on the sale. However if this painting is then resold at auction or via a gallery, it becomes a secondary market artwork and ARR due on the sale price of £15,000 would be £600. Private sales between individuals are excluded from ARR, so a secondary market artwork purchased from another collector, for example, would not incur any royalty fees. It is worth looking into the regulations where you intend to purchase art, as the law has variations across member states- depending on where you are transacting, it may be billed to the seller rather than to the buyer.
The offer
When considering a purchase, take your time to research the artist and the artwork under consideration. Find out their main gallery representation, exhibition and auction history and go to look at a wide variety of their work. Read their catalogues and try to understand this artwork in the context of the artist’s practice- how does this piece represent their work and ideas? Why are you attracted to it? Is the asking price within the range of prices you’ve reviewed for similar work?
There are also practical aspects to consider, such as budget and physical constraints. Think about how much you want to spend over the year on art and plan accordingly, leaving a buffer for extra costs above the purchase price for services such as insurance, shipping, installation and appraisals. Likewise, think about the space available for your collection, including access into that space. Can the artwork fit and will it be safe? More detailed risk assessment should be carried out for fragile materials such as photography, works on paper and fabric.
A note on cyber security: with the amount of business conducted online and high value for art purchases, these transactions are regularly targeted by cyber criminals. Case in point is the recent cyber attack at Christie’s auction house, which took their website offline for a crucial week during the recent spring auctions and left some client information visible to hackers. In another art world phishing scam, hackers infiltrate collectors' emails and follow transactions, taking over the seller’s email account at the last moment to change bank details to their own, hoping to receive the funds in place of the seller. The take away from all of this? Ensure your internet and online banking accounts have two-factor authentication activated, regularly change passwords and always call or meet the seller to confirm their bank details before sending funds.
Provenance research: What is provenance and why is it important?
Provenance refers to the full ownership history of an artwork. While Contemporary, primary market artworks may have a much shorter provenance record than an Old Master painting, it is important to try to have as complete a transaction history as possible for any art you purchase. Along with condition, provenance is one of the most important points to review when considering an artwork.
Provenance information should be requested from the seller when considering a potential purchase. For primary market, contemporary art, this will usually be a very brief summary. However for secondary market and historical artworks, verifying the provenance becomes a crucial step in your due diligence. This allows you to ensure the artwork can be sold legally and has not been looted, either as antiquities or during the Nazi era (transactions that took place during the period of 1933-1945) and that the seller has legal title to the work.
While most resources for provenance research are accessible to the public, it is also possible to outsource this step by hiring an independent provenance researcher to carry out the necessary investigations to fill in, as much as possible, any missing information and provide an extra layer in your due diligence.
What information should be included in a provenance record?
Previous owner’s names
Dates of ownership
Locations
Methods of transference (i.e., Was the artwork gifted, sold or inherited?)
Documentation to support the above information (i.e., invoices, deeds, house inventories)
Where to look?
Catalogue raisoneés are an excellent resource for provenance research, as artworks included in them are considered to be authentic works by the artist. An important online resource is the Getty Provenance Index which contains over 2.3 million records from archives, sales catalogues and dealer stock books. You can also check the Art Loss Register, the largest private database of stolen art, to cross-reference the piece you are considering. Artists’ foundations may be able to assist in provenance research or refer you to relevant experts. Provenance information should be backed up by verifiable documentation and rumored or unsubstantiated claims should not be included in these records.
Necessary paperwork
We can see how important historical record keeping is, to the extent that a lack of provenance information can have a negative impact on the value of an artwork and even delay or stop a sale. What are the key documents to collect and retain for your record keeping?
The original invoice, certificate, condition report, copies of any documentation from previous transactions
Shipping and import / export documentation
Copies of exhibition documentation, auction catalogues and catalogue raisonnée entries
Details of any repairs
High resolution photographs of the front and back of the artwork
While cloud -based or software-based database systems are convenient for ease of access and sharing of information, always ensure to have physical versions of the original documents plus at least one physical copy filed for safekeeping.
Verifying condition
When buying an artwork, even a contemporary one, the condition needs to be verified. A condition report should be requested from the seller and in the case of artworks that may have been previously repaired, you may want to employ a conservator to carry out a condition report on your behalf and advise on the feasibility and cost of any further restorations. It is also a good idea to employ a conservator for a secondary assessment of general condition for high value purchases.
Note that a condition report is not an appraisal report; an appraisal is a document that provides an opinion of value for an artwork for a specific purpose (insurance, gift tax, estate tax, etc) and for a specific audience (ie. the owner, the insurer, a lawyer employed by the owner) based on in-depth market research. The appraiser will refer to any condition issues as mentioned in a condition report for the artwork when forming their opinion of value, but this opinion of value does not constitute a condition report.
Insurance
When you purchase an artwork, title transfers from the seller to you. It should be insured from the moment of purchase and as this can take some time to set up if you do not have an existing policy, it is a good practice to get coverage in place or confirm your coverage in advance of any purchase. An existing homeowner’s contents insurance policy may be sufficient to cover your new art but reach out to the broker to confirm the coverage, up to what value and any other details.
The broker will probably want to be notified in advance of the purchase of any artwork so they can adjust coverage accordingly. Before this, the chosen storage or installation locations may also need to be reviewed with the insurance company to ensure your artwork is covered in those locations – the main concerns usually being what security systems are in place and where the artwork is to be kept (ie. the ground floor being a flood risk).
There are a variety of insurance coverage and reporting options that can be negotiated, depending on factors such as your level of coverage, if you employ an in-house registrar and the value of items insured. It may be possible to report only the total value per category (ie. silver, painting, jewelry) without disclosing details of individual items, or the insurance company may want to have a certified appraisal of the artworks included in your coverage. If your collection value is high enough to require specific fine art insurance, it makes sense to get quotes from a few insurance brokers specialising in fine art to decide on what plan is best for your collection. Recorded values for insured artworks are generally updated yearly, either via yourself or a certified valuation and this should be discussed with the insurance broker.
Logistics
Now that your purchase is complete, your artwork is ready to move and install. You should ask the seller how the artwork is packed (is it already crated or packed for shipping?). The gallery may be able to organize local delivery or provide a shipping quote for longer distance transport. You can also reach out to fine art shippers in your area for quotes to compare prices. The shipping company will want to know if the artwork is packed and how, the dimensions, weight and materials. They will request a copy of the original invoice and will let you know if the artwork requires a licence or additional import or export documentation.
The shipping company may be able to install the artwork after shipping, or you may want to find art installers for this step. If you plan to re-hang art frequently at a given location, it may make sense to have a good professional art installer team in your contacts rather than calling the shipping company each time, as they are usually more expensive. A museum curator or gallerist may be able to provide a referral to a trusted art installation team that they work with. Any installers should be insured to carry and handle values of goods that correspond to the level of art in your collection.
Documenting your collection
Having done the provenance research and gathered all the necessary paperwork, how do you go about cataloguing each artwork? The best method to follow is that set up by the International Council on Museums (ICOM) and the Getty Research Institute: The Object ID checklist. This format is used by leading museums internationally to document artworks in their collections, as well as law enforcement to search for stolen goods. By starting from this basis, you will already have your collection information recorded in the most widely used format.
The one-page Object ID checklist can be downloaded from the ICOM website and a more detailed PDF is available to download from the Getty website.
Where to see art?
While it may seem daunting, do not rush the most important step of developing relationships with the dealers, professionals, artists and other collectors that together make up the art world. It takes time to develop commercial knowledge within the art market and create meaningful dialogues with curators, artists and collectors that will allow you to deepen your art history knowledge, discover and strengthen your own preferences and understand the key players of the area you are interested in.
Most importantly, take time to go and see art, in a variety of settings- museums, galleries, auction previews and open days at art colleges and artist studios for example. Review books as well – artist catalogues, criticism and key reference publications on movements of interest are all important to ensuring you have a sound basis from which to develop your own opinions and make self-informed decisions.
Recap of Key Points
Consider the offer – Review provenance and condition information, auction records and exhibition history. Is the price offered in line with other sources in the market? If not, it’s worth asking why.
The purchase – Inform your insurance broker of the new purchase before it leaves the seller. Get physical copies of documentation, make copies and catalogue the artwork according to the Object ID checklist. Call the seller to confirm banking information.
The install – Decide where your art is going and check that this location is covered by insurance. You will probably want to be onsite during the installation process.
Collection maintenance – Update the artwork values for insurance every year, or as requested by your insurance company. Keep track of the artist’s exhibitions and publications to add copies to your library and update your catalogue records.
Develop your eye and aesthetic knowledge – Take time to go see art in person, get to know the experts in your area of interest and meet other collectors.