Art Market Transparency

Xiliary Twill of Art Asset Management Group sent me an interesting article from Aris Title on the complications and risk for art market professionals. The article zeros in on the lack of transparency within the art market.  Clearer processes in sales, prices and the compete process is what is needed, but has been hard to come by.  The article of course pushes the importance and need for art title insurance, as that is what Aris does.  Never the less, it is an interesting article to read.

Aris Title reports

Because of how the industry currently operates, it is impossible to eliminate gaps in ownership information, uncertainty over who is the current owner of the object, and be sure whether a party has the legal authority necessary to sell the work and any gaps in the overall succession of documentation. Simultaneously, the onslaught of litigation on the related issues of authenticity, valuation, and title suggests that collectors are more and more frequently demanding sound transactional practices grounded in fiduciary duty.

Simply put, smart collectors want the assurance that the art they buy is purchased for a fair value, is authentic (accurately attributed to an artist and not a fake or forgery), and is free and clear of any lien, encumbrance, or other issue that could impact the buyer’s ability to assume clear and absolute legal title.In all other industries, such as real estate and banking, advisors and intermediaries like agents and fiduciaries have an obligation to inform the client that they are representing about details like: from whom and how much the seller is to be paid, whether there are any conflicts of interest, and how any conflicts will be resolved. Translated to the art world and driven by current litigation, art dealers,galleries, and auction houses are required to disclose which party or parties they represent and to seek explicit consent from the client or clients if the party will represent both sides—the seller and the buyer. This disclosure is integral to an agency relationship. under most state laws—and most asset classes—an agent or fiduciary participating in an undisclosed dual-agency relationship is legally actionable because of the inherent conflict of interest.

Astute collectors should understand these growing market dynamics and consider proactive measures to ensure the integrity of their transactions. Thoughtful and proactive parties can manage their own transaction through better standards of practice and be part of the evolution in transactional standards, market-wide. The neutral third-party lens of a title insurer should be a key ingredient for any significant art purchase, the sale of a charitable gift, or an estate plan.

Source: Aris Title