Buying Art and Avoiding Legal Complexities

The NY Times ran a good article in their Wealth Matters column entitled  Avoid Legal Pitfalls when Buying Art.  Some of the concerns brought up are of course proper title and ownership, such as Nazi looted art and proper authority to sell the art, and also other outside claims to ownership.  Forgery is also mentioned.  The article also mentions getting value at auction, and not getting caught up in the moment  of bidding.  The article also notes that title insurance for art is available, but it is not something that has caught on with the majority of collectors. With a few high profile disputes, this could change.

Keep in mind as appraisers that ownership, claims and partial ownership can have an impact on value.  Know what you are appraising and do your due diligence.

The problem is in buying art that has unseen strings attached. The cases associated with Nazi-era art looting are well known. But claims associated with outright theft count for only a quarter of the lawsuits brought against owners of art, according to Judith Pearson, president of Aris, a title insurer specializing in art. The bulk of the claims come from more traditional liens and encumbrances.

“There are all kinds of examples — someone didn’t have the authority to sell the art, the I.R.S. has a lien on all assets for not paying taxes, the art was used as collateral for a loan and the loan wasn’t paid off,” she said.

This weekend’s auction of the Neuberger Berman and Lehman Brothers corporate art collections has several art advisers talking. While no one has suggested any impropriety in the sale, which was approved by a bankruptcy court judge, several advisers discussed other auctions that involved claims against the art. A spokeswoman for Sotheby’s, which is handling the Lehman auction, did not return repeated calls.

Click HERE to read the full NY Times article.