Acquiring Art and Building Art Collections
Before dealing with the legal aspects of contract preparation, a number of other questions need to be clarified when acquiring works of art from private collectors, professional art dealers or through auction houses: genuineness, conservation status, quality, provenance, freshness to the market, the subjects represented, format and international fungibility are among the factors contributing to the value of a work of art. Nowadays, before acquiring works of art it is necessary to check to see whether they are listed as lost or stolen on the Art Loss Register so as to be able to ward off any subsequent restitution claims which are gaining increasing significance due to international agreements. This also includes verifying the international fungibility by examining the various national and European regulations regarding the export of objects of art. In view of the fact that the statutory regulations are insufficient to adequately secure acquisitions, it is absolutely necessary to negotiate and draft contracts individually.
We are not active in the art market, but we are independent advisers who will be pleased to give you tips and broker contacts with other experts who will assist you in examining relevant non-legal issues.
The fact that art collections often reflect the identity of the collector explains the collector’s desire to improve the quality of the collection and to maintain it as a whole.
Advising art collectors also includes being entrusted with reviewing insurance contracts.
We will examine on your behalf the legal representations made and the financial conditions offered by your insurance company and we will advise and support you in all relevant contract negotiations.
International Art Lending/Protection of Cultural Property
Requests for the loan of art objects for exhibitions but also contracts with museums regarding the permanent loan of art objects require a legal basis on which questions of liability and the terms and conditions of exhibition are agreed.
Furthermore, from the perspective of the collector, cultural property protection issues are becoming an increasingly important factor when the collector fears that restrictions inhibit the fungibility of the collection. In the context of cultural property protection, we advise our clients not only on the appropriate location for the collection but also on possible options for avoiding registration in the so-called “National List”.
Establishment of a Museum/Foundation Matters
The desire to have one’s collection presented in one’s own museum or in a public museum is a topic with which we have already dealt in the past. In this connection, foundation matters but also financing matters are gaining significance. Some of our clients have decided to build their own museums, but we have also advised and supported collectors who have transferred their collections to public museums by way of endowment, donation or gift. This also includes advice and representation in legal and tax matters.
Assessment of Objects of Art for Tax Purposes
Whenever there occurs intergenerational transfer of art by way of inheritance or gift, questions regarding the assessment of objects of art for tax purposes play a central role. Based on our extensive activities as experts in this field we have together with others succeeded in influencing the relevant decisions of the fiscal courts.
When works of art are an integral part of business assets, German law requires an annual review of the partial value of such assets. For large company-owned collections, we organize this evaluation and assist you with our professional know-how.
Framework for Transferring Objects of Art
Objects of art figure among the few assets that– given certain prerequisites – can be transferred to the next generation free of gift and inheritance tax. We have developed a legal framework which allows the collector to retain full control as to the location of the collection but which also allows the following generations to participate in the value of the collection on a tax-neutral basis.
In addition, we conducted an appeal procedure for the relevant decision of the Bundesfinanzhof (German Federal Finance Court) in May 2016 and were thus able to reach a landmark decision. For the first time, the highest German financial court took a position on the question of what requirements are necessary for art works and collections, under the inheritance tax perspective, to remain tax-exempt for the transfer to the next generation.
Transfer of Objects of Art in Lieu of Paying Inheritance and Gift Tax
Since passage of the German Law on the Promotion of Culture and Foundations in 1990 it is now possible in Germany to pay inheritance tax in artwork. By applying this law, we concluded the first agreement of its kind in Germany between a major art estate and the federal state concerned and we advise and support large collections in all legal questions regarding the payment of inheritance tax in artwork.
Estate Administration/Will Execution
In the past we have advised and supported large collections and major collectors within the framework of estate administration and will execution. This requires, in addition to expert knowledge of art history, the preparation of an inventory of the estate and the subsequent settlement of the estate, recommending exhibitions and preparing exhibition concepts for publication and cataloging.
Sale of Entire Art Collections or Portions Thereof
Only someone who is familiar with the markets, observes their special rules and continuously monitors their development can be a confident market player. The art market not only shows peculiarities in the legal sense: Given that art – as an economic asset – does not have an earnings value or a net asset value that can be constructed, special importance is attributed to the judgment of the market players. Due to the limited nature of the art market, freshness to the market constitutes a criterion contributing to the value of a work of art.
Accordingly, knowing and selecting your contacts well is of great importance and confidentiality and complete independence are essential factors when selecting your adviser. We will advise and support you in selling your collection and we will handle the sales process as your legal advisers up to and including contract conclusion. The agreement of guarantees in the international auction business requires great experience in contract preparation and an independent negotiator who is bound only by his client’s interests and who will be remunerated exclusively by that client. We never act as dealers or brokers, but we are able to give you impartial advice on entering the market because we maintain equidistance from the dealers, the art brokers and the auction houses.
In recent years we have rendered legal advice and support in respect of the sale of works of art having a market value of 400 million euros, with sales in excess of 100 million euros in 2013 alone, and in conducting the corresponding negotiations with the international auction houses.