Leslie Rankow Fine Arts

INTERNATIONAL ART ADVISORY SERVICE

Safeguard your art in the UK and HK. Expert advice from Withers: The Art Market Adjusts

 

The art market transcends borders and art market participants must be cognizant of the varying laws that may govern their ownership and security interests in their works of art. 

The Art Market Adjusts: Protecting your assets from international creditors – UK and Hong Kong

Kenley: In the United States, if a buyer of a work of art consigns the work to a gallery, the consignor must put third parties on notice of its ownership interest to protect its interest from creditors of the gallery.  Xanthe and Soo Khim, how does the law differ in England and Wales and Hong Kong? For example, imagine that a buyer has consigned a work of art to a gallery for sale.  If the gallery becomes insolvent while holding the consignor’s work, what recourse does the consignor have to get its work back?

Xanthe: The general rule under the common law in England and Wales is that the owner of a work of art (ie holds title to that work) held by a gallery generally has priority over the gallery’s creditors. One exception would be if there were any sums due in connection with the work.  For example, a creditor of the gallery that might want to make a claim on the owner’s work of art would be a service provider who was engaged by the gallery to do some restoration or cleaning services on that work. If the gallery fails to pay the service provider, the provider could make a claim against the work of art for recovery of the unpaid service fees.

Soo Khim: The position in Hong Kong is akin to that in England and Wales, as we also follow the common law. Hence, the owner of a work of art will usually have priority over the gallery’s creditors. For a consignor, the position will be slightly more complicated if the work of art has been sold but the gallery has not yet transferred the net sale proceeds from the buyer to the consignor.  In this case, it will depend on when title will pass to the buyer pursuant to the terms of the consignment agreement. If title to the work of art passes only when the consignor receives the sale proceeds, even though the buyer may have paid the gallery in full, the consignor may have priority over other creditors of the gallery. The consignor should put the gallery or its storage facility on notice to stop delivery of the work to the buyer, pending clearance of payment by the gallery with the consignor (as the final step to effect transfer of title to the buyer). If, however, title has already passed to the buyer who has made full payment, the consignor will simply stand as a creditor of the gallery but will not have recourse to the work of art in question.

Xanthe: Soo Khim’s observations about the position in Hong Kong where the work of art has been sold will also apply in England and Wales.

Kenley: If the gallery is storing the work at a fine art storage facility under the gallery’s account, what additional steps should a consignor take to protect its interests?

Soo Khim: As with warehouse management of other forms of commodities, the gallery should enter into a custody agreement with the storage facility. Under this agreement, the storage facility should agree not to release or remove the work of art unless the consignor authorizes the gallery to request a release or relocation of the work. The agreement should also provide that the storage facility acknowledges and recognizes that the work of art stored is owned by a third party owner and not the gallery. This should prevent the storage facility from exercising a lien or set-off over the work of art for debts due by the gallery to the storage facility, such as unpaid storage fees. Lastly, the storage facility should have a system in place to segregate works of art stored by a gallery that are owned by different title holders.

Kenley: If a gallery in Hong Kong becomes insolvent while holding the consignor’s work of art, what recourse does the consignor have to get its work back? 

 Soo Khim: If the gallery has sold the consignor’s work of art but not yet paid the consignor, the consignor will be a creditor of the gallery and may file a claim of debt for the net sale proceeds due to the consignor in connection with the sale of the work. If the consignment agreement provides that the consignor retains title to the work until the consignor receives full payment, or if the gallery was required to and did place the sale proceeds in a segregated account, the consignor may be able to trace the sales proceeds or argue that it ought to be treated as a secured creditor and therefore has priority over other creditors. Otherwise, the consignor will simply stand as an unsecured creditor.

 SaKenley:  It is so important to be cognizant of how the timing of title transfer can affect one’s interests.  Now let’s imagine that a buyer purchases a work of art from a gallery located in London or Hong Kong, and the gallery is unable to ship the work to the buyer for an unknown period of time.  Against whom should the buyer protect its interests in the work?

Xanthe:  First, the buyer should protect its interests in the wor of art vis-à-vis the gallery.  The buyer and the gallery should enter into a custody agreement, which will formally document the arrangements and basis on which the work is being held by the gallery. The buyer should also request from the gallery a certificate of insurance for the work that names the buyer as an additional insured and loss payee.

Second, the buyer should protect its interests in the work of art vis-à-vis any potential creditors of the gallery. As previously mentioned, a service provider or, if the gallery becomes insolvent, a bankruptcy trustee or liquidator, could make a claim against the buyer’s work of art if there are any unpaid sums due to the gallery in connection with the work.  Such unpaid sums might include, for example, any outstanding payments by the buyer for purchasing the work, cleaning or restoration service fees, or security fees.

Kenley: What if the buyer is paying for the work of art in instalments? How would this affect the owner’s security interest in the work over creditors of the gallery? 

Xanthe:  If a buyer is paying for a work of art in installments and title will not pass to the buyer until payment has been made in full, the creditors of the gallery will have recourse to the work of art to the extent that any of the installments remain outstanding. The buyer should request written confirmation from the gallery of each instalment made and received. When all installments have been made, the gallery should provide the buyer with a written acknowledgement that the work is legally owned by the buyer and the work should have some form of notice affixed to it or placed in close proximity to alert others that the work belongs to the buyer.

In practice, this rule means that if the buyer has paid, for example, one out of five installments for the work, the creditors might have recourse to the remaining four instalments.  Note, however, that if a creditor of the gallery were to take possession of the buyer’s work and sell it, it would be a breach of contract and the creditor would need to reimburse the buyer for the installment portion the buyer has already paid.  If the creditor does not repay the buyer, then the buyer becomes a creditor of the gallery with respect to the installment payment it has made for the work, since the buyer has not received anything in return.  In such a case, if the gallery became insolvent, the buyer would be able to make a claim against the bankruptcy trustee or liquidator for the amount of the instalment portion already paid.

 

Soo Khim: Ideally, the sale and purchase agreement between the gallery and the buyer should stipulate clearly that title to the work of art has passed to the buyer notwithstanding that the payment would be made in installments. All owners of works of art, including artists, consignors and purchasers, should do the following to protect their security interests: obtain documents evidencing title ownership; affix to the work of art a written notice of ownership; include in any custody or consignment agreement a proper retention of title clause when parting with possession; require the gallery to segregate sales proceeds for a work of art; and obtain from the gallery written confirmations of payments. These steps are important particularly in the insolvency or bankruptcy setting, where the liquidator has the duty to identify assets belonging to the gallery that can be sold off for distribution of sale proceeds amongst its creditors, and segregate works of art that belong to different title owners which will need to be returned upon the gallery’s insolvency or bankruptcy.

 

The Art Market Adjusts: Changes in the workforce, Diana Wierbicki speaks with Sarah Murkett

I mentioned in a previous Q&A in this series that we are hearing buzzwords in the art industry during this pandemic, and unfortunately one of those buzzwords that is making many in the art world uncomfortable is “furlough.”  We’ve seen the news reports.  We know that there will be some employment adjustments.  So how can we all be proactive during these uncertain times?

In this Q&A, I speak with Sarah Murkett, Founder at Murk & Co, to discuss ways for employers and employees to turn the current situation into an opportunity to set goals, network, and improve skills.

Diana Wierbicki

Global Head of Art Law

The Art Market Adjusts: Changes in the work force

Diana: With hiring seemingly at a standstill at the moment, what would you suggest individuals do as we prepare for companies to begin hiring again?

Sarah: Let’s first acknowledge that we are in unprecedented territory here.  COVID-19 has created a global crisis the likes of which has not been seen since WWII that has resulted in a wide-spread economic shut-down.  Uncertainty rules and we are collectively focused on how to survive, both literally and financially.  And until we flatten the curve of infection, the world will remain in crisis mode.

It is estimated by NPR that around 17-million people in the United States have filed for unemployment over the last three weeks, which The New York Times claims, in a healthy economy, would normally hover around 500,000 in any given week.  That means that when jobs do open up there is going to be fierce competition for those positions, so now is a great time to prepare.

After you have gotten over the panic and settled into a new routine, allow yourself to slowdown.  Many of us were so busy in our pre-coronavirus lives that we never had a chance to stop and think about where we are in our careers and where we would like to go.  Take that time now and start to envision what you would like to be doing in five or ten years.  Once you have a goal then plotting a road map for how to get there is that much easier.

With your goal in mind then you should assemble your application documents.  Update your resume and work on the story of your career.  Your resume should be short and easy to read, with a focus on accomplishments and contributions, rather than a list of responsibilities.  And if you have not developed a strong verbal narrative to make sense of the choices that you have made in your career, explaining how you have arrived in the place you are today and the ways in which you would like to apply your experience to an opportunity that would allow for, even demand, continued growth with any company into the future, then now is the time to do so. Making a strong and confident presentation is the key to setting yourself apart.

And lastly, even though the rules of social distancing essentially have us on lock-down, it is important to take time for networking.  If there are companies that you are interested in connecting with then start following them on social media.  Participate in online programming, if this is something they are offering.  If someone that works at a company you are interested in joining is a friend of a friend then ask for an introduction to find out more about the culture there.  And get registered with recruiters in the field, sending them your resume and story, including the types of positions you are most interested in pursuing.

These tips are for all job seekers, whether they are currently employed or not.

Diana: In your experience, what skills have you found important to the art industry that you would suggest individuals work on developing during this time?

Sarah: While the art world is a niche industry, it also ranges across a number of diverse sectors including museums, auction houses, galleries, advisory firms, art fairs, publications, foundations, private collections, artist studios and art service companies, all with different functions and cultures.  But one area of concentration that any candidate would be wise to develop are soft skills.

If you do not know what soft skills are, they are valuable interpersonal skills that go beyond the basic requirements of the position (hard skills), and are often more important for small teams because these personal attributes are not really taught.  They include things like: adaptability, attitude, communication, creative thinking, work ethic, team work, networking, decision making, positivity, time management, motivation, flexibility, problem solving, critical thinking and conflict resolution.

Diana: What would you suggest companies work on?

Sarah:  This is an incredibly uncertain time for art world businesses.  With the disruption of revenue streams, most companies are trying to figure out how to stay afloat.  The first, and most important thing is to take a hard look at the business to determine the overall financial picture and come up with an action plan for cut backs on expenditures, research into ways in which the company might be able to apply for aid or funding, and ideas for pivoting into new ways of making money.

Once you have this picture then you need to work on ways to effectively communicate your plan to your community, both internally (employees, contractors, vendors) and externally (clients, general audience), truthfully with compassion and generosity.  In a time of high stakes, and even higher levels of anxiety, this is not an easy task.  But how companies behave through this crisis will have long-lasting effects on their community and reputational value in the field.

Diana: After going through this process of social distancing, do you anticipate the demands of the art industry will change?

Sarah: Technology. Technology. Technology.  The art world has been late to the game and this crisis has put a priority on the development of technology in a couple of key areas.

First, with the widespread closure of brick and mortar arts and culture institutions including museums, galleries and art fairs, there has been a rush to connect with audiences through the creation of online content.  So far this is a mixed bag.  There is an overwhelming amount of content to explore at varying levels of success.  And this makes sense because unlike Athena, the goddess of war and wisdom, who was born fully formed from Zeus’s head, digital media takes time to grow and nurture and you just kind of have to jump in and try things out to see what works.  And as with most things in the art world, these are not usually experts who are being asked to develop this content, but rather it could be the communications person who has dabbled in social media, or a member of the team who saw what needed to be done and raised their hand to help out.  They might not even have the right equipment or editing programs to create something on a professional level.  This is a dawning of a new age filled with experimentation, like the silent film era, and everyone is going to be trying different things out, learning by doing and seeing what works.  So, while we sit at home, looking for virtual ways to connect with our community, we are the guinea pigs.  But like with anything new, therein lies opportunity.  Digital is a growth area for any arts business and the industry will benefit exponentially from the investment in trained people to show us the way.

Second, as art world businesses are considered non-essential, let’s assume that if you are lucky enough to still have a job, most people are working remotely.  To work effectively from home, or any safe shelter a worker has chosen to hunker down for the duration, teams require technology to do so.  At the very least they need a strong internet connection, a computer and secure access to company files (usually on a cloud).  I also personally require a notebook to take notes.  For over a decade I keep something I call an office in a bag.  It weighs all of five pounds, and I can literally work from anywhere in the world with my setup.  And even when I do not have access to wifi I can use my smart phone as a hotspot.  This allows for freedom and flexibility.  And now that art workers are getting themselves set up to work this way, I am not sure that they are going to want to give it up.  So, moving forward employers should prepare for their employees to be asking for perks like a being able to work from home 1-2 days a week.  This is an easy enough thing for business to give their employees, whose presence is not required onsite.  It often leads to an improved quality of life, which results in happier people and increased productivity.  And these are results that any company should want to help facilitate.

Diana: What do you anticipate the role of a recruiter will be in this new space?

Sarah: What I do is simple to explain.  I am a matchmaker.  I help my clients to find the people that they need to run and grow their businesses.  I do this by listening so that I am able to develop an understanding of my clients’ needs on the one side and build trust relationships with the very best candidates in the field on the other.  My clients and candidates are bound to evolve as we navigate our way through this crisis.  As always, I am here to listen and think creatively about how to evolve with them.

As an example, I am working on developing a series of helpful resources, for employers and job seekers alike.  The first one will be on video interviewing, available through my soon to be regular newsletter.  So, if you are interested in hearing more, please sign up through my website murkandco.com.

LATER THIS WEEK, THE LRFA BLOG CONTINUES ITS INTERVIEW WITH SARAH MURKETT. IF YOU ARE INTERESTED IN LEARNING MORE ABOUT THE ART OF RECRUITING FOR THE ART WORLD, PLEASE JOIN AT https://leslierankow.wordpress.com/

STAY SAFE!

 

The Art Market Adjusts: Artists interacting in new ways with Diana Wierbick’s Global Art Team at Withers

 

Social distancing has impacted all facets of the art industry, and the primary art market has not been immune. As our team continues to engage in these Q&As, a question that often arises is – How are artists doing? Some artists are using this time to reset, and others are coming together to cope. This is a time when many of us are in search of artistic inspiration to lift our spirts and help us process our current situation. Perhaps a silver lining is that we might witness some extraordinary art at the end of this, as the pandemic might present unexpected opportunities for artists to engage their creativity. To stay connected with the public and art collectors, some artists have turned to social media and virtual visits set-up through their galleries. In the last few weeks, museums and galleries have worked hard to bring art into our homes and provide us with ways to connect with artists online.

In the Q&A, my colleague Amanda Rottermund speaks to Sarah Calodney, Director at Lehmann Maupin, about gallery relationships with artists around the world and the tools artists are using to engage with collectors and the artist community.

Diana Wierbicki
Global Head of Art Law

The Art Market Adjusts: Artists interacting in new ways

Amanda: Sarah, you travel frequently to meet with artists and clients you work with, so this quarantine must be so unusual for you – how have you been connecting with them from your base in Dallas?

Sarah: I think the art world is built on personal relationships. Prior to this pandemic, in-person visits were the most meaningful way to connect with both collectors and artists. Showing up for a viewing or studio visit was literally half the battle. That of course has completely changed now. There are less connections expected of you but it’s been tough figuring out the right balance between checking in and giving everyone the mental space to adjust and cope. I have really enjoyed FaceTime calls with the artists I work with or sending encouraging texts back and forth. Artists really think about the world in such unique ways, so I love having their perspective during this time.

With clients, aside from checking in to see if everyone is safe and healthy, it’s more on a “they come to you” basis. I think it’s a great time for collectors to appreciate what they have already in their collection. So, I’ve been sending “hand typed” messages to clients updating them on artists they’ve collected over the years with recent news that may or may not have seen. It’s not often you get the time to read all of the articles and books published about your artists. Now we have the gift of time. So it’s a moment to find a new way of viewing that painting you acquired from me three years ago, or to open that catalogue sitting on your coffee table that you received from me as a holiday gift last year. It’s been nice actually connecting with a few on a more personal level than usual actually over email, text and even (gasps)…on old-fashioned phone calls. It’s always casual and no pressure. It’s surprising how much business has been getting done this way. I had to arrange my first virtual viewing this morning and I can see that becoming more common as we bridge the gap! So even though I’m physically in Dallas, I’m working to find connections on all levels.

Amanda: When we chatted last weekend, you mentioned Liza Lou had invited the public into her studio for a virtual studio visit. Is that something she had ever done before or was it directly correlated to the quarantine?

Sarah: It was a direct result of the quarantine. A lot of artists are doing virtual visits via their galleries or the Council at the New Museum and I know they are organizing a few virtual visits for members. But, for Liza’s, it’s open to the public which is really a beautiful thing. She created a website www.apartogether.com and an Instagram handle @apartogether_art for the project. You just need an Instagram account and you can log in. She is doing these studio visits weekly, inviting the public to sew with her, which is the main form of her practice.

Amanda: With so much more time for people to slow down and reflect, how do you think this global reset will affect artists you are working with? Are they taking this opportunity to dig deeper and find more space to create?

Sarah: I think artists are naturally isolated or at least our romantic notions of the artist in the studio alone working tirelessly late into the night conjures up those associations. In recent times artists have come away from that into more collaborative art making processes, whether its studios with a multitude of assistants or artists engaging with the public through performance work. There are many artists who are actually relishing this time to go back to the basics and be alone in their studio. We’ve personally had several artists respond that way and I think there will be some really important works made during this time of crisis. Angel Otero is one example of an artist who has been working tirelessly day and night on a new body of work that is unbelievable. He’s been texting me a few photos and I can tell he is really driven from a visceral reaction to the state of the world. I can’t wait to hopefully show it in real life.

After all, art is an essential element of human nature and it allows us to see the world in new ways never thought possible. Think about the great German artists and art that emerged in the post- World War II trauma. Gerhard Richter’s blurred black and white paintings, including my favorite work of art of all time, the Baader-Meinhof cycle, which was a direct result of the after effects of war. Or Kiefer’s heavy and awe encompassing paintings which were literally built up from the ruins of war. If you wanted a more direct correlation, there were huge advancements made in art as a result of the bubonic plague. I think Da Vinci designed a whole city then. Of course, every artist is responding differently. Some artists are taking a step back from producing, or experiencing severe anxiety and not engaging, which is totally fine too. Not every artist needs to “produce” great work right now and they shouldn’t feel any pressure to do that.

Amanda: You work with artists who live all over the world. Do you see any cultural differences in how artists are processing and working under the effects of the global pandemic? Have you seen any artists coming together to cope with the effects in dialogue with one another?

Sarah: It seems like our artists based in China (like Liu Wei) and Korea (such as Lee Bul) are already back to work as normal. Though, I think the response is less culturally motivated and more related to the art they make. For example Liza Lou’s work has always had a community aspect to the practice helping those most in need, so it makes sense that her work now would be about community outreach during the COVID reality we all face. She’s invited the public to make a comfort blanket with her. Depression and isolation are very scary and real side effects of this pandemic and Liza is interested in addressing that and channeling that emotion and energy in an uplifting way. The simple act of making art is restorative. It’s been proven to help people coping with depression or drug addiction, just ask Hunter Biden or Vincent van Gogh.

The process of recruiting the perfect job candidate with Sarah Murkett, founder of Murk & Co.

Recruiting for the Art World

THE CLARION LIST, A COMPREHENSIVE VETTED ONLINE DIRECTORY FOR ART WORLD SERVICES, FOUNDED BY FORMER CHRISTIE’S EXECUTIVES, JESSICA PAINDIRIS AND GAIA BANOVICH, INTERVIEWED HERE AT THE LRFA BLOG IN 2018, POSTED AN INFORMATIVE ARTICLE ON ART MARKET RECRUITERS IN JULY 2019, MATCHMAKERS: HOW ART MARKET RECRUITERS FIND THE PERFECT FIT.

IT STATES:

In January 2018, the American Bureau of Labor Statistics found that the median employee tenure was 4.3 years. This means that Americans change jobs, on average, every 4.3 years, which works out to more than 12 moves over a 50-year career. There is also early evidence that shows a trend towards an even shorter median tenure. Gone are the days of spending an entire career with one company. Today’s job market is all about making smart transitions.

Whether you are a job-hunter seeking your next position, or a hiring manager looking to fill a vacancy on your team, a recruiter can provide a wider range of options and help you make the right choices. 

https://www.clarionlist.com/blog/matchmakers-how-art-market-recruiters-find-the-perfect-fit.html

THE ART WORLD IS UNDERGOING RADICAL CHANGES DUE TO THE CORONAVIRUS, A CATALYST IN TRANSFORMING THE WAY IN WHICH WE VIEW, PRESENT AND MARKET ART. THE SHIFT FROM THE BRICKS AND MORTAR WORLD TO THE DIGITAL ONE BECAME A REQUISITE, NOT JUST A CHOICE OR AN ADDITIONAL MARKETING VEHICLE AS ALL THE GALLERIES, ART FAIRS, MUSEUMS, AND PRIVATE DEALERS HAVE HAD TO SHUT THEIR DOORS FOR THE DURATION.

SPECIALISTS IN  IT, MARKETING, CURATING, AND CREATING ART-TECH INITIATIVES,  A VIRTUAL PLATFORM FOR THE ART WORLD , ARE IN INCREASING DEMAND. LATER THIS MONTH, FOR EXAMPLE, HAUSER & WIRTH IS LAUNCHING ARTLAB AT ITS MENORCA LOCATION, A NEW INITIATIVE EMPLOYING HWVR, A NEW VIRTUAL REALITY THAT CREATES  3-DIMENSIONAL ENVIRONMENTS FOR THEIR VIRTUAL EXHIBITIONS.

Hauser & Wirth, Menorca
ArtLab

HAVING VAST EXPERIENCE IN DIFFERENT PROFESSIONAL ROLES IN THE ART WORLD, IT WAS A NATURAL SEGUE FOR SARAH MURKETT, FOUNDER AND OWNER OF MURK & CO., TO OPEN A RECRUITING AGENCY  FOR ART INSTITUTIONS AND GALLERIES.

THE LRFA BLOG IS PLEASED TO WELCOME SARAH BACK TO ANSWER SOME QUESTIONS ABOUT THE STRUCTURE AND POLICIES OF MURK & CO.

HOW DOES THE SEARCH WORK?

My client’s needs are the beginning of any search.  The first step is getting to know my client, their culture and the particulars regarding the open position.  I go to my network of registered candidates first, then look at new applicants that come in through job postings.  And finally I do new research and outreach for passive candidates that are currently in jobs that I am not in touch with that might be good for the role.

Even if I know them, I speak to interested candidates about the role to determine suitability (hard skills, soft skills, culture fit, geography, work status, salary requirements).  When a suitable candidate is identified and is interested in the role then I put them forward.  I then await feedback from my client.  If my client is interested in a particular candidate then we arrange for a 1st interview.  I recommend at least three interviews with the candidate meeting various members of the team. 

Eventually a winning candidate is identified and then the real work begins with my client making an offer, followed by contract negotiations, with common concerns being, salary, health care, 401K, paid time off, with work-life balance issues becoming increasingly important to candidates.

Art Table Talk
Photo by Imogen Fairbairn.

 

WHAT ARE THE REASONS A COMPANY/GALLERY/MUSEUM WOULD BENEFIT FROM WORKING WITH A RECRUITING FIRM RATHER THAN ATTEMPTING A SEARCH BY THEMSELVES OR VIA, PERHAPS, LINKEDIN OR SOME OTHER COMPARABLE SITE?

I recently gave a talk on recruiting to ArtTable members as part of their Professional Empowerment Series and specifically addressed this question.  Here are five reasons why an employer would want to use a recruiter:

  1. Small business syndrome – Art world business are often small and might not have the man-power and in-house know-how to conduct a thorough search and so it makes sense to hire an outside consultant, such as a recruiter for their expert help
  2. The search for highly skilled labor – Today companies are not training employees up and promoting from within and are instead looking to hire people who are already trained and so need help to recruit this highly skilled labor
  3. Passive candidates – Recruiters have a network of talented candidates who are currently in jobs, as well as the ability to earn the title “head-hunter” when they approach potential candidates who may not be actively looking
  4. Partnership – When you engage a recruiter you should be shopping for a business partner that will be given access behind the curtain, which will empower them to offer guidance and advice like an insider every step of the way, helping to ensure that the process goes smoothly and that the best match is found
  5. Diversity – A large number of people get hired through an internal network.  Unless you are starting with a diverse workforce to begin with, then referred candidates are likely to be like those that referred them.  A recruiter can help break this cycle and introduce people from outside of existing networks

HOW HAS THE INDUSTRY CHANGED SINCE YOU FIRST ENTERED THE ART WORLD AND WHAT ARE THE WAYS IN WHICH MURK & CO ARE PARTICULARLY RESPONSIVE TO THESE CHANGES?

There are sooooo many things.  It’s hard for even me to believe but I graduated from college 24-years ago.  The most significant evolution that Murk & Co hopes to positively contribute to is the continual professionalization of the industry.  The art world is full of businesses that started as passion projects, and I like to say that you do not know how to do something in the best way, unless you are taught.  Essentially these small business owners need guidance about best practices when it comes to attracting and retaining top talent.  This is precisely where Murk & Co can step in to help.  The field is becoming increasingly competitive in every sector and so companies that feel like their employees are just lucky to have a job are going to be left behind. 

WHAT ARE YOUR RECOMMENDATIONS TO CANDIDATES IN ORDER TO RETAIN THE EMPLOYMENT YOU HAVE FOUND FOR THEM?

Like any relationship, employment is a two-way street.  I find that the employer is often as much a part of the reason why a particular candidate does not work out, as anything that the candidate might be responsible for.  Part of my job is to try and lay out the position, with all of its perks and challenges, to candidates, and to be honest with my clients about the particular strengths and weaknesses of the candidates I am putting forward.  But teams in the art world are very small and success often comes down to chemistry.  So, despite best intensions, it is still an imperfect process.

WHAT IS THE GENERAL ARRANGEMENT BETWEEN MURK & CO AND THE CANDIDATE AND THE COMPANY HIRING?  WHAT HAPPENS IF IT DOESN’T WORK OUT AFTER A SHORT TIME OR ISN’T THERE A TRIAL PERIOD?

There is usually a rebate period to the client if the candidate does not work out within a specified period, but sometimes it might just be conducting another search to find a replacement candidate.  Outside of the specific reasons for why the engagement did not work out and how that reflects on the candidate’s reputation, this has no impact on the candidate.

IN OUR NEXT LRFA POST, SARAH WILL SHARE HER  FUTURE PLANS FOR MURK & CO.

IF YOU ARE LOOKING FOR THE PERFECT CANDIDATE, OR RESTAFFING AFTER THE LOCKDOWN OF COVID-19 IS FINALLY OVER, CONTACT SARAH TO PROVIDE HER EXPERT HELP IN RECRUITING FOR THE ART WORLD.

https://murkandco.com/

The Art Market Adjusts: Temporary relief for cultural institutions under the CARES Act

Last week, we discussed how the CARES Act incorporates expanded tax benefits for those making donations to certain charitable institutions, such as museums. However, given the current economic circumstances, many taxpayers may not find themselves in a position financially to take advantage of the expanded charitable contribution deduction in 2020. In tacit acknowledgement of this fact, and as the expanded deduction benefits only a limited class of charitable organizations, the CARES Act contains additional provisions that are calculated to alleviate the financial woes of charitable organizations struggling with continuing revenue losses and accumulating expenses. One such provision creates the Paycheck Protection Program, which makes loans, and, in some circumstances, provides loan forgiveness, to small businesses, including charitable organizations.

In this conversation, my colleagues Steve Chidester and Sarah Verano discuss how charitable organizations may benefit from certain provisions in the CARES Act, including the Paycheck Protection Program

Diana Wierbicki

Global Head of Art Law

The Art Market Adjusts: Temporary relief for cultural institutions under the CARES Act

Sarah: We have been hearing a lot about the CARES Act and its loan program for small businesses. One of the aspects of this loan program is the Paycheck Protection Program that provides loans up to $10 million to businesses with fewer than 500 employees with the additional potential benefit of loan forgiveness for certain loan expenditures. Can you explain how this might benefit charitable organizations?

Steve: As applied to tax-exempt charitable organizations, the Paycheck Protection Program (PPP) makes available 2-year loans of up to $10 million at 1% annual interest to organizations with fewer than 500 full-time, part time, or other employees.  The maximum loan amount is the lesser of (a) 2.5 times the average monthly payroll over the past 12 months plus the outstanding amounts under economic injury disaster loans or (b) $10 million.

The loan proceeds can be used for payroll and benefits, mortgage interest, rent, and utilities – but at least 75% must be used for payroll costs.

The borrower can apply for loan forgiveness for amounts used within 8 weeks after loan funding for payroll costs (but not for compensation exceeding $100,000 for a single employee) and payments on pre-existing obligations for mortgage interest, rent, and utilities.  The forgiveness amount is reduced if employee count or wages are reduced from the previous year, but if payroll has already been reduced, the forgiveness formula rewards a restoration of payroll after receiving the loan.

The federal government’s funding for the PPP is limited, so eligible charitable organizations should not delay in applying.

Sarah: Why do you think Congress included charitable organizations within the definition of small businesses for purposes of qualifying for a PPP loan? We have previously discussed in this Q&A series how the CARES Act already incentivizes increased charitable giving by private donors by incorporating expanded tax benefits for those donors.  

Steve: Allowing tax-exempt charitable organizations to participate in what are referred to as business loans under the PPP for employers of fewer than 500 employees is a recognition that charitable organizations are important small employers in our country.  It also acknowledges that in a time when many people are in need on so many levels, the services and efforts of the charitable sector are more important than ever, but charitable organizations cannot serve if they are forced to lay off their people.

In addition, the benefit of the 1-year 100% AGI limit on charitable deductions will not be felt uniformly across the charitable sector; it may benefit some charitable organizations handsomely but leave others wanting.  The PPP loans provide an additional safety net for organizations that are unable to cover their losses by increased fundraising.

Applying for or receiving a PPP loan under a program that speaks of the borrowers as businesses does not mean that the charitable organization borrower is operating for business purposes instead of its charitable mission.

Sarah: What types of charitable organizations do you anticipate are most likely to benefit from this program?

 Steve: Charitable organizations that are tax-exempt under Section 501(c)(3) of the tax code (no distinction is made between public charities and private foundations) that have had fewer than 500 employees for the past 12 months and who intend to keep paying those employees despite the economic downturn should look into the PPP.

Sarah: Are there any charitable organizations that are excluded from the program or which ought to proceed with caution?

Steve: The PPP loans are available only the employers of fewer than 500 employees, so some substantial charitable organizations will not qualify.  With other types of businesses, the employee-count limit is applied on a location-by-location basis, so larger charitable organizations that are distributed among several locations might explore those categories.

Tax exemption under Section 501(c)(3) is a prerequisite to qualifying under the provisions of the program that speak to nonprofit organizations.  Organizations that are exempt under Section 501(c)(2) (title holding organizations), or 501(c)(4) (social welfare organizations), 501(c)(6) (trade associations), 501(c)(7) (social clubs), or any of the many other subsections describing other types of tax-exempt organization may be able to qualify under other elements, but should read the Act carefully.

Additionally, the Small Business Administration’s affiliation rules will apply in determining the eligibility of a charitable organization for a PPP loan.

Sarah: Are there any other programs or tax code provisions you would recommend charitable organizations to take a look at right now?

Steve:  The Employee Retention Tax Credit allows certain employers – both for-profit firms and nonprofit organizations – to claim a credit of up to $5,000 in compensation paid to each covered employee from March 13 through December 31, 2020.  Because this credit is applied against employment tax, which most nonprofit employers pay, rather than against income tax liability, the credit will be beneficial to many charitable organizations.  If the credit exceeds the employer’s share of employment tax actually paid, the employer can receive the excess as a refund.

The eligible employers are those whose business is fully or partially suspended by the government due to COVID-19 or that have seen a decline in gross revenue by 50% compared to the same calendar quarter of the prior year (until gross revenue recovers to 80% of the quarter for the prior year).  Employers who retain employees on payroll even though they are not working can claim an employment tax credit of up to 50% of qualified wages (up to $10,000) paid to each employee.  For employers of more than 100 full-time employees, this applies to employees who are not working due to COVID-19 circumstances (“not working” as opposed to “working remotely”).  For employers with 100 or fewer full-time employees, all employee wages qualify even if the employer remains open for business.

Additionally, charitable organizations and for-profit firms alike are permitted to defer payment of the employer’s portion of payroll taxes (6.2% of Social Security taxes).  The deferral is for payroll taxes for the period from March 27 through December 31, 2020.  The deferred taxes are payable 50% on December 31, 2021 and 50% on December 31, 2022.  But no deferral is permitted if the organization receives a loan forgiveness under the Paycheck Protection Program.

Under the CARES Act, the Federal government will provide funding to the states to reimburse 50% of unemployment payments by charitable organizations described in Section 501(c)(3) of the Code who are self-insured for unemployment compensation.  The program covers payments made between March 13, 2020 and December 31, 2020 on all unemployment claims, not just COVID-19 related claims.

THANK YOU DIANA WIERBICKI AND WITHERS FOR THIS SERIES!

The Art Market Adjusts: Withers Worldwide on global art transport and storage during the time of the COVID-19

Silhouette of woman walking in front of striped illuminated wall

DIANA WIERBICKI, GLOBAL ART LAW AT WITHERS WITH FRITZ DIETL, PRESIDENT OF DIETL INTERNATIONAL, A FINE ARTS AND LOGISTICS SOLUTIONS PROVIDER

One of the major topics of discussions that I have been having over the last month has been about the interruptions to art shipping and access to art viewing rooms.  When it comes to art market economics, we are all acutely aware that art shipping is a vital component necessary to complete transactions.  In a matter of months, canceled art fairs, auctions, and exhibitions globally have brought many planned art shipments to a pause, leaving no segment of the art industry unaffected.  Even though some collectors are still looking to relocate art, the ease of moving art is becoming increasingly difficult as the virus moves across the globe, and this is, unfortunately, affecting private sales as well.  While logistic solution businesses are considered essential businesses and allowed to operate, they warn there will be extra time and measures needed for moving and storing art in this environment.

The Art Market Adjusts: How global art transport and storage businesses are operating during limited mobility

Diana: Fritz, we have had a number of conversations lately about shipping logistics – about when, how and at what cost. Can you explain how the measures taken globally to slow the spread of COVID-19 have had an impact on art transport?

Fritz: It has absolutely had an impact on many different levels.  The combination of canceled art fairs, canceled auctions, canceled gallery shows, and closed museums has basically brought the entire industry to a complete standstill.  If you add the lost freight capacity (a lot of airfreight moves in the belly of regular passenger flights) and the increased cost and bottlenecks of the remaining freight space, as well as, confusing government restrictions of what is or is not allowed to move on the streets, you quickly realize that it has become almost impossible to continue business in any form right now.

We have clients who still want to move some art, for whatever reason, but we have to caution everyone to allow extra time and not expect the usual levels of service.

Diana: Have you encountered any of these types of transport hurdles before?

Fritz: We briefly encountered this after 9/11, but that was a local event, and at least the logistics world quickly came back to normal, albeit with new sets of security regulations, which are in effect to this day.

We certainly also felt the recession of 2008, however, that was just a brief loss of confidence in the market, and especially the art market quickly rebounded. This event certainly feels a lot different from anything we have ever experienced before.

Diana: As the virus has moved across the globe, how does the transportation situation compare in the different regions?

Fritz: Logistics companies are still allowed to operate in the US thus we can still put trucks on the road, but it is becoming increasingly difficult to find fine art truckers still willing to operate under the current circumstances.

Inner European transports have largely stopped for the time being since borders are closed. Thus if we can’t find a direct flight (as mentioned earlier, this is increasingly difficult as well), then we may not be able to move shipments to their final destination until the current restrictions are lifted.

In Asia, we see some signs of life, but with the limited flight capacities continue to be a challenge to service clients in that region as well.

Diana: In addition to art shipping, art storage has also been affected. How is your Delaware Freeport storage facility handling the current situation?

Fritz: We, of course, implemented all the necessary steps to keep our staff safe, including regular cleaning and disinfection of surfaces, as well as limiting access to our facility to all outside personnel. Outside vendors who deliver or pick up property are required to stay outside while our personnel handles the receive/release & safe loading of property.

We have a very small staff working inside our warehouse, and almost all functions in the warehouse can be performed while maintaining proper social distancing. Our crew is equipped with masks, goggles, and latex gloves thus whenever they do have to work closely together, they are still protecting themselves and each other.

All of our office staff are working from home for the time being to further reduce the number of personal interactions in our warehouse.

Diana: Are clients permitted to access their storage units?

Fritz: It is rare that clients personally come to our warehouse in Delaware (though we have regular visits from conservators; photographers & registrars), but with proper notice we will continue to set up and display their property in our viewing rooms. We encourage our clients to let us handle all necessary services in house with our on site team, but if it is critical we will continue to give access to clients, conservators, photographers and registrars with proper social distancing and protective gear protocols in place.

Diana: What advice do you have for collectors and art businesses who may want or need to move or store art during the next several months?

Fritz: 1. Some of the smaller operators may have a hard time surviving this crisis. The cash run rate of many art storage/ handling companies already forced many of them to lay off most of their staff (after only 2 weeks of lost business), so be careful whom you trust with your property. Will the warehouse where you have your valuable collection be able to keep their doors open and their lights on? If you already got notice that the facility is closed and you won’t have any access to your property, then you should at least ask a few pointed questions and get enough assurance that the temporary closure is indeed just temporary.

2. You may be able to negotiate some relief with your storage providers, but keep Point 1 in mind if your storage provider is out of business, you may have a hard time getting your property back. So continue to pay your storage bills and follow Diana’s advice about protecting your art from creditors, just in case.

3. If you need to move art now, don’t expect business as usual. While we can and are still putting trucks on the road (logistics companies are deemed “essential” and allowed to operate even in NY), we may not have access to your property if your warehouse is closed.

Also, expect that movements may be more expensive than usual. We book such few jobs currently that almost every transaction comes with a “full day rate” for truck & crew.

THANK YOU, DIANA, FOR ANOTHER EXCELLENT INTERVIEW ABOUT THE IMPACT OF THE CORONAVIRUS ON ASPECTS OF THE ART INDUSTRY AND MARKET.

 

Running the gamut of the art industry with recruiting expert, Sarah Murkett

 

In an ideal world, we’d succeed based on our actual skills and performance. But in the real world, subtle perceptions and stereotypes color others’ perception.The result might be that our hard work isn’t noticed or appreciated, our effort doesn’t lead to proportional rewards, and our good ideas aren’t taken seriously. Success is about knowing who you are and using that knowledge strategically and unapologetically. 

Laura Huang, Associate Professor at Harvard Business School, author of EDGE , writes brilliantly about turning adversity into advantage. As Huang writes, “Your work matters. But it is your job to help the world see how it matters”. Creating an edge is the key to succeeding within an imperfect system.

A SECRET WEAPON IN FINDING THE JOB OF YOUR DREAMS IN THE ART WORLD IS WITH THE LRFA BLOG TODAY.

SARAH MURKETT, FOUNDER AND  OWNER AT MURK & CO. SINCE 2017, PROVIDES EXECUTIVE SEARCH AND STAFFING SOLUTIONS FOR THE ART WORLD. WITH OVER 20 YEARS IN THE ART WORLD, SARAH OFFERS HER CLIENTS AND CANDIDATES STRATEGIC ADIVCE ABOUT STAFFING ACROSS THE FIELD.

SARAH, WELCOME BACK!  WHAT PROMPTED YOU TO FORM MURK & CO.? 

Murk & Co started as an art dealership and advisory.I had been working freelance for so many years without need for a formalized company. But when I decided to go out on my own as a dealer, purchasing work and taking it on consignment, I felt the need to incorporate for personal protection from legal and financial liability should, heaven forbid, anything go wrong, even by accident, which it never did.But private art dealing is a risky business, and it is not for the faint of heart.

And as my next move, I decided to pivot to recruiting.

WHAT RECRUITING SERVICES EXISTED AT THE TIME YOU FOUNDED MURK & CO. WHAT INSPIRED YOU TO LAUNCH THIS BUSINESS?

I wanted to move away from sales and do something that would take advantage of my network and put to use the knowledge I had of the different sectors of the art world.  I had also done a lot of hiring for my clients/employers, so I knew I liked recruiting and believed myself to have a successful track record in that arena.

Sarah Murkett
Founder, Murk & Co.

WHAT IS THE SCOPE OF SERVICES MURK & CO PROVIDES?

Right now I am focused on talent acquisition.  There are different levels of partnership that are offered depending on the needs of the client.  Some searches are more straight forward and I have candidates at the ready to put forward immediately, but often I am being brought in for much more complicated searches that require a deeper collaboration. 

WHO ARE THE CANDIDATES THAT AVAIL THEMSELVES OF THE EXPERTISE MURK & CO CAN PROVIDE?

Really, anyone with art world experience that is looking for a job.  And while my relationships with my candidates are the lifeblood of my business, and I have made it a goal to make the application process as humane as possible, with a high level of communication throughout the process, it should be made clear that recruiters work on behalf of the businesses who are looking for staff, rather than for the people who are looking for jobs. 

ARE YOU PRIMARILY FOCUSED ON EXECUTIVE SEARCHES AND WHAT ARE SOME OF THE MOST DOMINANT JOB DESCRIPTIONS THAT ARE REQUESTED?

“Executive Search” really just means recruitment at the senior level. Being engaged to work in partnership with an organization to fill these key positions is very exciting work.  I also work on a wide range of positions at varying levels. 

I read a statistic that recruiters are mainly hired for help with sales and operations related positions, both of which are critical to the running of a business, and I would say that, in general, I find that to hold true for my own recruiting business.

WHO ARE YOUR CLIENTS? IS IT LIMITED TO GALLERIES OR DOES IT COVER A BROADER RANGE OF ART RELATED BUSINESSES

It runs the gamut across the industry including auction houses, advisories, artist studios, art fairs, publications, communications firms, museums, foundations, art tech, art shipping and handling companies and much, much more.

TO WHAT AREAS OF THE COUNTRY DO YOU PROVIDE YOUR SCOPE OF SERVICES?

Anywhere that I am needed.

Sarah Murkett
Speaking to the group at Bonham’s.
Photo by Imogen Fairbairn.

WHAT ARE THE PRIMARY REQUISITES THAT YOU LOOK FOR IN POTENTIAL CANDIDATES AND IN WHAT WAYS DO YOU VET THEM? DO POTENTIAL CANDIDATES FILL OUT QUESTIONNAIRES? HOW DO THEY APPLY?

Every vacancy has its own particular requirements, and I won’t work on a search unless there is a thoughtful job description, including both the requisite hard and soft skills.  The search process isn’t about what I am looking for, but rather an effort is made to understand what my clients are looking for, and then sifting through registered candidates, applicants, and research into potential passive candidates that might be a good fit.

I meet prospective candidates in person, whenever I am able, to get a sense of their energy, personality and personal presentation, and when schedules or geography get in the way, then I start with a phone call.

I advertise positions on my own website (https://murkandco.com/) and on LinkedIn (https://www.linkedin.com/company/murk-&-co.), and candidates are instructed on how to apply.  They can also request to be registered in my database generally.

HOW MANY JOBS ARE AVAILABLE AT APPROXIMATELY THE SAME TIME ON YOUR SITE?

2-10

DO YOU INTERVIEW THE CANDIDATES PERSONALLY PRIOR TO HAVING THEM CONTACT THE POTENTIAL EMPLOYEE?

Yes.  And I am available to both the candidates and clients through the whole process, helping to schedule interviews, provide and discuss feedback and assistance with contract negotiations.

IN OUR NEXT LRFA BLOG, WE WILL POST SOME RECENT OPEN POSITIONS AT MURK & CO. THAT SHOW THE RANGE OF OPPORTUNITIES TO WORK IN VARIOUS SECTORS OF THE ART WORLD.

PLEASE JOIN US!

 

Protecting consigned artworks from creditors. The Art Market Adjusts with Withers Global Art Team

 

 

Thanks to a new series with Diana Wiernicki, Global Head of Art Law, and her team of experts at Withersworldwide.

In financially uncertain times, both artists and collectors who have works on consignment should take the necessary steps to protect their works of art from seizure by a consignee’s creditors. We have found that many consignors are unaware that, in certain circumstances, they can lose the rights to their artwork to a secured creditor of a consignee gallery or dealer. Fortunately, collectors and artists can reduce their risk with a Uniform Commercial Code (UCC) filing. Without this filing, consignors expose their works of art to creditor claims in a bankruptcy situation.

In this conversation, my colleagues, Dean Nicyper and Kimberly Almazan, discuss how collectors and artists can utilize UCC filings to protect themselves and their consigned works of art. 

Diana Wierbicki

Global Head of Art Law

The Art Market Adjusts: Protecting consigned artworks from creditors

Kim: You and I have both handled a number of cases on behalf of collectors in which a gallery is struck by financial hardship.  People are always surprised to hear that, without putting protections in place, a collector who consigns a work of art to a gallery for sale might lose that work of art to the gallery’s secured creditors in a bankruptcy situation.  Can you explain why this is the case?

Dean:  Sure.  Let’s say you are a collector and you consign your painting to a gallery for sale.  The gallery owner tells you he thinks he can find a buyer within 6 months and that he will not sell it for less than $500,000.  You sign a consignment agreement with the gallery and walk away thinking that you have protected your rights.  Three months later, you realize that the gallery has been having financial problems and you go to the gallery to retrieve your painting.  But your painting is gone.  It turns out, the gallery had a creditor (usually a bank or other lending institution) and that creditor now claims that your rights to your painting are subordinate to its right to foreclose on and sell the painting be reimbursed for its unpaid loan.  But you are the owner of that painting and you should get it back, right?  Not necessarily.

Under a set of laws known as the Uniform Commercial Code (“UCC”) which governs commercial transactions, including consignments, inventory covered by a lenders security agreement includes not only art owned by the gallery, but also art that is consigned to the gallery. So, under the UCC, if the gallery becomes insolvent or bankrupt, the bank or other creditor can take all collateral including consigned art until it recovers the amount it loaned.

Kim:  This sounds scary for collectors, but there is a fairly easy way for collectors to protect themselves.  Can you explain what a UCC-1 Financing Statement is, and what effect it has in these types of situations?

Dean:  Collectors who consign a work of art to a gallery can file a document, known as a UCC-1 Financing Statement, with the Secretary of State’s office in the state in which entity owning the gallery was formed.  This UCC-1 Financing Statement should be filed prior to delivery of the consigned work(s) to the gallery or art merchant.  Filling out the UCC-1 Financing Statement is fairly simple; one must list the consignor (the collector), the consignee (the gallery), and provide a general description of the collateral.  The collector then submits this form to the Secretary of State and pays a small filing fee, usually between $20 and $50, depending on the state.

The filing of this document provides notice to all of the gallery’s creditors and potential purchasers that the collector holds an interest in the work of art.  The rationale is that, by filing the UCC-1 Financing Statement, encumbrancers are able to ascertain the existence of security interests in property by checking a centralized record system.  In other words, the UCC system, like title recordation systems for real property, is based on providing constructive notice through recordation.

Kim: This situation can be potentially complicated if the gallery’s creditor or bank filed a UCC-1 Financing Statement that covers all of the inventory in the gallery before the collector files his or her UCC-1 Financing Statement covering his or her particular work of art.  Is there anything collectors can do to protect themselves in this situation?

Dean: If, before the collector delivers the consigned art, he or she informs the gallery’s secured creditor(s) in a written notification that he or she will be consigning art, the collector does not need to get the creditor’s approval for the art to be outside of the bank’s collateral.  In order to do this, the collector will need to perform a UCC lien search in the state in which the entity owning the gallery was formed to find out the identities of the gallery’s other creditors.  The collector must then send the written notification to all of the gallery’s secured creditors that filed UCC-1s.

If the collector fails to notify the gallery’s creditor(s) in writing prior to delivery of the consigned work, and the collector files a UCC-1 Financing Statement subsequent to the creditor’s filing its UCC-1 Financing Statement, the collector can contact the creditor and seek an express, written exception to the creditor’s security interest.

Kim: Artists, unlike collectors, have special protections in these situations.  Certain states in the country have statutes specifying that consignments by artists are not subject to claims by a gallery’s creditors.  You had a role in crafting provisions of this type of statute in New York.  Can you explain how these statutes work?

Dean:  That’s right.  New York has had a carve-out in place for decades — Section 12.01 of the Arts and Cultural Affairs Law — establishing that artist-consigned works of art are trust property held by the gallery for the exclusive benefit of the artists, and establishing that proceeds from the sale of those artists’ consigned works are trust funds held for the exclusive benefit of artists.  In 2012, after the collapse of the Salander O’Reilly Gallery, in which many of these issues unfortunately played out for collectors in the gallery’s bankruptcy, I was involved in prompting the New York Legislature to enhance this statute to, among other things, allow artists to enforce certain rights directly against galleries.  Similarly, in California, Civil Code Section 1738.5 states that where an artist delivers a work of art that he or she created to an art dealer/gallery for the purpose of sale or exhibition, that work of art shall not be subject to a claim by a creditor of the art dealer/gallery.  As a result, in certain states, artists consigning their own works of art to galleries for sale will not have to file a UCC-1 Financing Statement as collectors do.

A large canvas painting on an easel in a creative artist studio.

Thus, while financially uncertain times can certainly create worry, both artists and collectors have the ability to protect themselves and their works of art from seizure by an unknown creditor.

 

Artist pension trusts, how they work, with expert Sarah Murkett, founder of Murk & Co.

THE ARTIST’S RESALE RIGHT (ARR) IS AN INTELLECTUAL PROPERTY RIGHT THAT ENTITLES ARTISTS TO A ROYALTY PAYMENT EVERY TIME AN ORIGINAL WORK OF ART IS RESOLD BY AN AUCTION HOUSE, GALLERY OR DEALER.  IT WAS FIRST INTRODUCED INTO THE UK IN 2006. ALTHOUGH IT HAS ITS ADVANTAGES IN THEORY, IT CAN BE A BURDEN ON THE ART AND AUCTION MARKET WITH NEGATIVE EFFECTS BOTH ON THE ACCESSIBILITY OF WORKS AND ON THEIR PRICING.  OVER THE YEARS, IN THE UNITED STATES, DIFFERENT LAWMAKERS HAVE CHAMPIONED FEDERAL EFFORTS TO ESTABLISH THE RIGHT IN THE U.S. AND ARE FACED WITH THE SAME CONFLICTS.

https://itsartlaw.org/2019/07/01/its-not-that-easy-artist-resale-royalty-rights-and-the-art-act/

ANOTHER CONCEPT THAT WAS DEVELOPED AT THE TIME WAS THE ARTIST PENSION TRUST OFFERING LONG-TERM FINANCIAL SECURITY AND INTERNATIONAL EXPOSURE TO SELECT ARTISTS AROUND THE WORLD.

SARAH MURKETT, FOUNDER AND PRESIDENT OF MURK & CO., WAS  INSTRUMENTAL IN THE TECHNICAL AND AESTHETIC DEVELOPMENT OF BOTH MUTUALART AND THE ARTIST PENSION TRUST. IT PROVIDED HER WITH A PROFOUND KNOWLEDGE OF THE WORK OF MANY ARTISTS IN THE APT COLLECTION, CURATORIAL EXPERIENCE AND A SOPHISTICATED KNOWLEDGE OF A BUSINESS  BASED ON A DATABASE DIGITAL PLATFORM, ALL INVALUABLE WHENSHE CAME TO FORM HER OWN BUSINESS, MURK & CO.

THE LRFA BLOG IS HONORED TO SHARE HER EXTENSIVE KNOWLEDGE AND PROFESSIONAL HISTORY AT MUTUALART AND THE ARTIST PENSION TRUST WITH YOU TODAY.

SARAH, WELCOME BACK!

Sarah Murkett
Murk & Co installation
Work by Allan Mc Collum

TELL US ABOUT YOUR TIME AT MUTUAL ART. HOW IS THE COMPANY STRUCTURED AND WHAT IS THE SCOPE OF SERVICES IT PROVIDES? IT SEEMS TO OFFER A RATHER COMPREHENSIVE VIEW OF THE ART MARKET, AUCTION RESULTS AND APPRAISAL SERVICES AND ALSO TO REPRESENT THE SALE OF ARTWORKS FROM A BROAD RANGE OF PERIODS.

I was introduced to MutualArt through my friend Candice Madey of Stellar Projects whose ex, Ayal Brenner, was the CEO of the company.  MutualArt was looking for someone who could source secondary market material to offer to their global network of collectors.  The company was started by tech entrepreneur Moti Shniberg, who had also founded the Artist Pension Trust (APT), whose mission was to support artists through collectivized pooling of art, invested by the artists themselves into a Trust, for eventual sale, the proceeds of which were to be distributed back to the artist members.  At heart, the impetus for MutualArt was to build a base of collectors to potentially sell artworks from APT, which they boasted as being the largest collection of contemporary art in the world.  The way they devised to do this was to build a website that aggregated information about artists, including upcoming exhibitions, current news and most notably auction results. 

MutualArt article
Art Pension Trust Makes First Distribution

As with many tech companies, it was the interests of the collectors (the data), derived through the artists they followed and their behavior of the site, that was the ultimate value proposition.  They brought me on as the Director of Sales for both companies, and I was charged with building sales platforms for both MutualArt and APT, including trying to identify and optimize synergies between them.

I leveraged my network and partnered with collectors and dealers to offer individual works and larger curated sales on and off the MutualArt website.  I helped to develop original content and edited a weekly MutualArt newsletter, which would often feature APT artists. I familiarized myself with the works in the APT collection and initiated sales for the company, which ultimately lead to the first payouts to member artists.  Unfortunately, there were 5 different CEOs in the 4-years that I was there and the infrastructure and vision for the two companies never came together.

WHAT WERE THE HIGHLIGHTS OF YOUR JOB AT MUTUALART. WHAT WERE THE AREAS IN WHICH YOU CONCENTRATED AND IN WHAT WAYS DID THIS INCREASE YOUR KNOWLEDGE AND FAMILIARITY WITH THE CONTEMPORARY ART MARKET?

My favorite project that I worked on while at MutualArt was the online selling exhibition that I put together in 2014 of video art from the APT collection called, “We’ve All Got Issues”.  There was a concurrent brick and mortar manifestation at the NEWD Art Show, a short-lived artist focused fair in Bushwick, which was organized by Kate Bryan and Kibum Kim, who invited us to participate.

Sarah Murkett
We’ve All Got Issues
Video Art from the APT Collection

The inspiration for the show was the APT collection itself.  There was a lot of video in the collection and while most artwork does not readily lend itself to a screen, I thought that video by APT artists and the MutualArt selling platform, which lived on a screen, made for a natural pairing.  I spent a Xmas holiday watching every video in the collection and from that, “We’ve All Got Issues” was born featuring work by artists such as Brian Alfred, Kevin Cooley, Keren Cytter, Rico Gaston, Kate Gilmore, Annika Larsen, Kalup Linzy, David Shrigley and Mark Titchner.

Needless to say, the show was not a commercial success.  What it taught me is that no matter how broad the platform for promotion, an exhibition in and of itself is not enough of a machine to create a market for work for which there is not much of a market to begin with.  This is the hard work that the galleries that represent these genre pushing artists do every day.

HOW DID THE ARTIST PENSION TRUST WORK AND HOW WERE THE ARTISTS SELECTED?

The Artist Pension Trust story is actually quite tragic.  It was a noble undertaking started in 2004 to provide financial security for artists into their old age.  It was to be a kind of retirement plan for artists, into which the only asset that member artists needed to invest was their art. Every artist was to contribute 20 artworks over 20 years and the number of shares they had in any distributions was determined by the number of artworks they had “deposited” in the Trust.  If selected well, some of the art was bound to go up in value over a minimum 10-year hold period.  The model said that only 5% of the artists needed to do well in order for everyone to benefit in the long run.

Kalup Linzy
NEWD art fair installation
Mutual Art exhibition

I still think it is a great idea, and that this version was just poorly managed, but poorly managed it was.  Here is a link to a story outlining the saga:

https://www.theguardian.com/money/2018/mar/17/art-pension-trust-investment-legal-action-artists

After closing a big round of financing, with new investors who wanted to see profits, management decided that a selection of the best works from the collection should be sold at auction.  It was my opinion that the artworks in the collection had not really established a demand in the market such that they would do well at auction.  Additionally, I did not think that APT’s artist members, or their galleries, would be supportive of the initiative.  I believe that I lost my job over this opinion.  The great news was that the sale in New York had a very high sell-through rate, but most of the work sold at the low estimates, which was well below the artist’s retail prices.  This bore itself out, much as I had predicted with artists and their dealers up in arms, so much so that APT pulled out of the follow-up sale in London.

SARAH, THANK YOU.  SARAH IS A WEALTH OF KNOWLEDGE IN SO MANY ASPECTS OF THE BUSINESS OF ART. WE LOOK FORWARD TO A CONTINUED DIALOGUE ON THE STEPS THAT LED UP TO STARTING HER OWN COMPANY/

AND THANK YOU TO THE MANY LRFA BLOG FOLLOWERS FOR YOUR COMMENTS AND SUPPORT.

The Withers Art Team on Insurance Implications for Fine Arts from covid-19

The Art Market Adjusts: Insurance Implications for Fine Art Collectors and Exhibitions


24 MARCH 20
Diane Wierbicki and Withersworldwide always provide exceptional guidance during normal times, and now in light of our lockdown, here are invaluable insights into the impact of coronavirus on insuring art.

 In these uncertain times, the Withers Art Team remains optimistic but pragmatic.  A variety of questions are coming our way, and we have put together a series of Q&As to provide you insights from our partners, colleagues, and industry experts to assist you in understanding the impact to the art industry in this unchartered territory.

We begin this series with a conversation with Mary Pontillo, Senior Vice President National Fine Art Practice Leader of DeWitt Stern Fine Art, addressing several measures to consider with regard to protecting your art and your art business.

With continued support and best regards

Diana Wierbicki

Global Head of Art Law

 The Art Market Adjusts: Insurance Implications for Fine Art Collectors and Exhibitions

Diana: Mary, to start, we have been hearing the insurance term “business interruption loss” being discussed given the current situation.  Is that term applicable to what is going on now as a consequence of the virus?

Mary: Yes and possibly no.  People are definitely experiencing an interruption in their businesses; however, in our experience, the Business Owners or Package policies will likely not respond because there needs to be a “physical loss or damage” claim to trigger business interruption. The virus is not causing a physical loss or damage to peoples’ space, thus the policy will likely not respond.  Every claim has its own distinct circumstances and we are encouraging our clients to submit claims so the insurance companies can make a determination based on the specific details of each loss.

In addition, the landscape shifts daily.  There is some movement on the legislative side to create “…a federal guarantee of payments by insurers for business interruption claims irrespective of viral exclusions.”  We will absolutely stay up to date on this legislation and will let our clients know when this is finalized and how it affects them.

Diana: With regard to fine art insurance, you and I discussed considerations related to existing exhibition loan agreements and consignment agreements.  Why is it important for the parties of those agreements to review those contract terms now?

Mary: Yes, you and I discussed that contract terms vary with regard to insurance coverage provisions and that some contracts tie the duration of insurance coverage to specific dates rather than to a general date of return. If coverage dates need to be extended, you should obtain an amended agreement and updated Certificate of Insurance.

Also, take a look at how long the items will now be at the location.  Is the location coastal?  Will the items be there through hurricane season (begins June 1st)?  Ask the museum to confirm that they have full wind/hurricane/flood coverage and ensure your loan agreement stipulates that the museum is responsible for any deductibles.  If you don’t feel comfortable with your item being there through hurricane season, you might want to look into ways to get the work back and/or ask the museum for a full details regarding how the works will be protected from hurricanes.

Diana: With regard to exhibition loan agreements specifically, what do the collectors and museums need to keep in mind with regard to increased policy limits that are tied to exhibitions?

Mary: From an insurance policy limits standpoint, say your painting on loan is part of a high-valued exhibition for which a museum had to increase their insurance limits.  You’ll want to check in with the museum to ensure that a new Certificate of Insurance is issued for the new term and confirm that they continue to have adequate limits for all artwork on loan to them.

Diana: We have been hearing a lot lately about companies telling their employees not to come into work.  In the art industry this has caused certain fine art storage facilities to create modified security measures.  Do collectors need to worry that any of these modified security measures in warehouses, or even galleries or museums, that might affect their fine art insurance coverage?

Mary: We have many fine art warehouses as clients and all of them have the ability to monitor their cameras and alarms remotely.  Luckily New York State included warehouses on their list of “Essential Employees” so most warehouses will be able to send someone there each day to do a “wellness check” on the building.  They will ensure all systems are operating and if there are any problems, luckily “skilled trades such as electricians, plumbers…other related…professionals for essential infrastructure or for emergency repair…” are also part of the “Essential Employees” list in the State of New York.  Also keep in mind that the police and/or the fire department respond to the various alarms connected to art storage warehouses.  All of these factors give me comfort that warehouses and the art within them will be very safe.  Galleries and museums, for the most part, will be following similar protocols.  I think it is appropriate to ask these questions of anyone holding onto your artwork right now.  They will be prepared to answers questions of this nature during this unusual time.

Diana: Are there any other issues that you think art businesses need to protect themselves against in the current climate?

Mary: Hackers are using this vulnerable moment to ramp up targeting people through Ransomware attacks and phishing emails.  In the middle of figuring out our “new temporary normal” the last thing any of us want to deal with is a data security incident.  I want people to ensure they are covered for Cyber losses and have the resources to lean on should this happen.

Also, many people are relying solely on Wire Transfers for payment.  You should go analogue and pick up the phone to confirm wire transfer information with the other party before releasing wired funds in order to avoid a wire transfer fraud situation.