Inside the Growing Courts of High-Priced Art

Judd Grossman is a major figure in the fine art world, someone many art dealers, auction houses and even museums have to deal with. But he is not a collector, museum director or art consultant. Instead, he’s a Manhattan attorney, and many of his clients are high-end art collectors who turn to him when they’re thinking about buying, selling or lending a high-value piece of art. No matter what these clients want to do with their art, they rely on Grossman or lawyers like him to legalize the work, often with long contracts.

These sales contracts cover all possible conditions, clause by clause. Does the seller own the artwork free and clear, with the right to transfer title? Who pays sales tax? What happens if there is a property change years after the sale? Does the buyer have the right to reproduce the image? Who is responsible for legal costs if there is a challenge to the title of the artwork? What is the price, and how will the artwork be paid for… cash, Bitcoin or over time? When does title pass to the buyer? Does the buyer, the conservator, have the right to inspect the work of art before taking it? Who pays for the crating, shipping and guarantee work? Will the seller guarantee not to disclose the name of the buyer and the price paid? What happens if that information becomes public? Who pays commission to an art consultant? There are sections on warranties, provenance, condition reports, indemnification and escrow accounts. The list goes on.

“A big part of our practice is writing purchase agreements, property agreements and loan agreements,” Grossman said, describing the sales he’s been involved in as “paperwork.” Lots of papers. William Pearlstein, a New York City attorney who also represents many art collectors, told the Observer that the sales agreements he writes for gallery purchases “usually run about seven to twelve single-spaced pages.”

Welcome to the world of big-ticket art sales, where the traditional ‘handshake and invoice’ has largely disappeared, replaced by an invoice coupled with a formal contract running on pages and attempts to account for all possible scenarios. Driving this change is “a new group of collectors over the last 20 years, people who are extraordinarily wealthy, who are used to doing business a certain way, who are used to doing things their own way and who like to spend legal money,” art attorney Susan Duke Biederman told the Observer. One of his clients was given a 27-page contract for the sale of art (he called the buyer “crazy”), but increasingly the sales he’s involved in now involve buyers and sellers who tend to “transfer everything legally.”

Our country is full of crimes. Lawsuits arise when the terms and conditions in the sales contract are violated, but such disputes can occur even if no contract existed. “If the contract clearly states the rights and obligations of the parties in these matters, that will tend to reduce the scope of legal problems that can arise,” said Amelia Brankov, a Manhattan attorney with a large practice in art law. He noted that the most common disputes “often involve which party is responsible in the event that a work is damaged while in transit from seller to buyer, which party is responsible if the work is later discovered to be a forgery or forgery, or what happens if someone else later claims to be the ‘true owner’ of the work of art.” In the latter case, the artwork may be sold while it is collateral for an unpaid loan.

Megan Noh, co-chair of the art law department at the New York law firm, Pryor Cashman, noted that some sales agreements also address anti-money laundering laws, which require “a written assurance that those involved are not themselves (and affiliated with) persons or organizations that have been sanctioned and are not using proceeds of crime, and that such violations are not the result of a violation of the law or a violation of the law. tax evasion.” Art trades can sometimes be opaque, and a clause like this can be “especially important” when one or both parties work through an agent and their identities are hidden, he added.

If buyers rely on their attorneys to draft sales agreements, art dealers must hire attorneys to review, approve and negotiate those contracts, all of which add to the cost of buying works of art. And there doesn’t seem to be any other exception. As one New York City gallery director put it, “people want it in writing, or there’s no deal.”

Of course, the gallery owners themselves have become more formal in their work. A number of gallery owners require that buyers of works by certain artists in the primary market sign agreements guaranteeing that the works will be sold only by them, not through an auction house. New York gallery owner Andrea Rosen noted that she has included those terms on every invoice since she opened her gallery. Artists may impose their own conditions on the resale of their work, as James Turrell and Sol LeWitt have done, requiring owners to apply to them (in Lewitt’s case, his estate) to “transfer” documents that allow the artist to approve or deny the sale to a new owner. Both South African artist Marlene Dumas and Scottish-born artist Peter Doig want buyers of their paintings to agree to donate works to museums rather than resell them. Those terms are written and verified by its vendors. When collectors go against their wishes, lawsuits have followed. In 2010, Dumas directed galleries representing his work to refuse to resell some of his paintings to a collector who had sold one through a New York gallery, and that collector filed a lawsuit against the gallery, essentially for extortion. (That case was dismissed in Manhattan federal court.)

“Sometimes, lawyers do things that are more than lawyers,” Grossman said, and some lawyers have a limited understanding of the craft their contracts are meant to govern. Lucy Mitchell-Innes, a former Manhattan gallery owner and now independent art dealer, recalled a sales contract sent by a collector’s attorney for a 1952 Barnett Newman painting she was selling. In another clause, the agreement declared that the agreement would be annulled if it was shown that the artwork had passed into the hands of the Nazis in Germany. “I had to point out to the lawyer that Barnett Newman painted this after the war and that it was painted in the US,” he said. The effort to dot every “i” and cross every “t” can sometimes go too far.

“I’ve heard some vendors say, when they’re handed a 20-plus page contract, ‘Are you crazy? That’s not how we do business,'” Biederman said. “I ask clients who want me to write a purchase contract, ‘Do you want to make the seller angry? Do you want this deal to go through quickly? How much do you want to spend on legal fees?’ “However, he added, more and more retailers are concluding that today “this is the way to do business. It’s good for me. I’m making money.”

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