Abandoned Art in Storage Facilities

I had a group of topics that I was considering posting today, including the Christie's Old Master sale results, Skates part II art market report. an update on the NY lawsuit on revealing auction sellers names (I will try to post next) and an interesting article from Daniel Grant writing for the Huffington Post on abandoned property in storage facilities.  Grant looks at the law of abandoned property in storage in NY State.  The information is well worth noting for appraisers and auctioneers, as well as buyers.

Grant uses an abandoned 1931 Duesenberg Model J left in a storage facility by an owner suffering from dementia   Jay Leno ultimately purchased the car for $180,000 and had it restored.

The Huffington Post reports

The law in all 50 states requires storage warehouse owners to make a "reasonable effort" to locate the late-to-pay person who had rented storage space, which usually means sending a notice to that person's last known address. Under New York State law, the warehouse owner is empowered to sell abandoned property (the rental agreement often stipulates 90 days), paying the person who rented the space the additional amount over what is owed, and that total may have increased with the costs of inventorying the objects in storage, advertising the sale, hiring someone to hold the sale and paying for any other sale-related expenses. Ten days before the public sale, the warehouse owner must notify the owner of the property that there will be a sale, in effect giving that person a last chance to work something out.

If no arrangement is reached between the property owner and the warehouse owner, and no court intervenes at the request of an interested party, the objects will be auctioned to the highest bidder. The proceeds of the sale are used to satisfy the warehouse owner's "lien" -- the right to take possession of the property until the debt has been paid -- although any amount of money above and beyond the amount of the debt is required by law to be passed on to the original owner. (In order to insure that the debt is paid, or if the warehouse owner would rather keep the stored objects rather than sell them, the property may be auctioned with a reserve.) If the original owner cannot be found or does not come forward to claim remaining proceeds within two years, New York State's abandoned property law requires the proceeds to be turned over to the state.

The warehouse owner is not obligated under New York State's Uniform Commercial Code to obtain a fair market price for the abandoned property. "The fact that a better price could have been obtained by a sale at a different time or in a different method from that selected by the warehouse is not of itself sufficient to establish that the sale was not made in a commercially reasonable manner," according to one section of the code, although the statute does not spell out what a "reasonable manner" is and the type of sale that may be deemed reasonable for the sale of automobiles could be inappropriate for works of art. As one Manhattan lawyer noted, is that it is "not the warehouse owner's business to own and sell things," and, in general, fulfilling the basic obligations for a sale is good enough. That the warehouse is generally, "they'd prefer to have the money (and clear out the space) than to speculate in the future value of that abandoned property."

Source: The Huffington Post