Fine Art Resale Agreements

Judd Tully recently wrote an article for Art & Auction that should be of interest to most fine art appraisers. Tully writes about resale agreements which mostly involves retail galleries. These agreements typically prevent the purchaser from selling the art for some specific period of time without giving the original gallery the right of first refusal to re-purchase.

Some within the industry question the legality of these agreements, but many believe that if worded properly, they can be enforceable. Tully states the agreements are "little-known but widespread practice of so-called artist/gallery resale agreements in primary market transactions" and are “a way for the artist to control and protect his intellectual property in the marketplace.”

Tully continues "Although the wording varies, these clauses basically require or request the buyer to agree, in writing or otherwise, to give the gallery or artist the right of first refusal, usually for a limited time, when the work is about to be resold."

Tully adds, "Top-tier galleries typically seek to maintain the career of a major artist or rising star over the long term, and high auction prices aren’t always matched in the larger market. In addition, works at auction may not fetch stellar prices and can easily wind up in the hands of anonymous collectors, or worse, speculators unknown to the original dealer."

From an appraisal standpoint, whenever the title of ownership might be encumbered or questioned there is a case to be made of a loss in value. If not all markets are open based upon an enforceable resale agreement and the right to sell within the most appropriate market is restriced, then value is impacted. Fine art appraisers should be aware of the practice of resale agreements, inquire with the client if there are any resale restrictions and value accordingly.

To read the Art & Auction article, click HERE.