Hurricane Matthew: Preparing for the Worst

According to the latest news reports on Weather.com, Hurricane Matthew is now strengthening again over warm water north of Cuba, with the Bahamas and parts of Florida’s Atlantic coast, the Georgia coast, and coastal Carolinas potentially in line for a strong hurricane strike. In light of these concerns, The Fine Art Group is releasing a list of what to do before, during and after in order to minimize losses of tangible assets.

With limited time to prepare and people already acting on plans to evacuate, we highly recommend starting with a call to your insurance broker to verify proper insurance coverage for all tangible assets, including flood insurance. If you have not done so already, you may wish to provide them a copy of your video appraisal as well as receipt of any recent acquisitions. If preparing to move some art, verify your policy covers transportation as some do not.

As a reminder, most property damage caused by hurricanes is a result of strong winds, heavy rainfall and storm surges. If pressed for time, using sandbags to build a perimeter around flood-prone ares as well as boarding up windows is the least you should do to prevent significant damage. Next, consider removing art from walls made of plaster and art hanging on walls across from windows. Do not store any valuable art or collectibles below ground level (such as the basement). If unable to relocate the art to a safe location out of the storm’s path, move the art to a safe room at the center of the structure that is free from windows, such as a hall closet or bathroom.

HURRICANE PLAN OF ACTION FOR PROTECTING TANGIBLE ASSETS

PREPARATION BEFORE THE STORM

• Discuss insurance coverage with your broker. Review your policy for costly gaps in coverage. If moving any fine art, verify that your collection is insured during transit. Some insurance companies have a waiting period before activation of policy changes, so plan ahead.
• Determine the type of damage your building and area is likely to suffer. Are trees likely to fall from strong winds? Have them trimmed regularly to remove weaker branches. Do you have lots of windows? Prepare to board them up. Are you located in a flood zone? Know where you can find sandbags in the event of an emergency and avoid storing valuables in the basement.
• Update your inventory with photographs and copies of your receipts. For maintaining records of your tangible assets, The Fine Art Group offers video inventories that can be shared with your insurance broker and used to reconstruct the contents of your home in the event of a loss. Think about items you have acquired recently or didn’t have included in a recent appraisal.
• Maintain a list of fine art shippers, art storage facilities, conservationists and your insurance broker. Turn your smartphone camera into a scanner with apps like CamScanner and Scannable to capture records and receipts digitally to store on the cloud and store important paper records in a waterproof safe.
• Establish a plan to relocate valuables. Select a reputable fine art shipper to move valuables to a predetermined secondary location out of the storms path.
• Collect all of the recommended items, below, for your Tangible Asset Emergency Kit.
• If you are likely to be away in the event of an emergency, communicate emergency plans with your property manager. Ensure they are aware of your valuables and know how to handle them during an emergency.

DURING STORM WARNINGS AND ACTIVE STORMS

• Board windows and establish a perimeter of sandbags around flood-prone zones.
• Remove art from damage-prone areas. This includes art facing windows and art hanging on walls made of plaster. Plaster becomes damp and may not have the structural integrity to support works of art.Learn from the mistakes of Hurricane Sandy and avoid storing valuables in the basement.
• Move works of art to a safe room, preferably a room without windows located at the center of the structure. Pack valuables in waterproof crates and plastic bins. Use acid free cardboard to prevent frames and works on paper from touching. You may also carefully wrap valuables in plastic poly to prevent water damage, possibly using acid free cardboard (and extra caution) to protect the surface. If possible, keep the works of art elevated from the floor should flooding occur.
• Monitor the storms progress and be prepared to evacuate.

DEALING WITH THE AFTERMATH

• If the structure is secure, begin assessing the damage. Photograph overall damage to the site with subsequent photographs of specific damage.
• Do not throw away any damaged items! Even if the item is a total loss, consult with your insurance broker first and photograph the item for later claims.
• Move items out of harms way and to a safe, dry location.
• If necessary, put the dehumidifier and wet vac to use! Create an air-flow with fans and the AC. Clearing the air of moisture is key to preventing further damage from mold.
• Inspect the property for any new leaks and board up any damaged areas.
• Inform your insurance broker and begin the process of filing a claim. If faced with sizeable damage to your collectibles and art, establish a plan of action with your insurance broker in collaboration with art handlers, conservationists and appraisers.

HURRICANE EMERGENCY KIT FOR FINE ART PROTECTIONS

Like an Emergency Kit, we recommend keeping these items on hand to manage your art collection in the event of a natural disaster. These items can be used to thoroughly document any damage, protect your collection as best as possible during an emergency, and prevent further damage from occurring.

• To document: Digital camera with extra memory card, batteries and charger, pencils, notepad, flashlights with additional batteries.
• To pack and transport: Latex gloves, rolls of plastic poly, packing tape, string tags, labels, scissors, box cutters, markers, acid free cardboard sheets and tissue paper.
• To protect during and after: Sand bags, plastic bins, waterproof crates, buckets, portable generator, dehumidifier, wet/dry vacuum, fans and extension cords.

FURTHER INFORMATION

• Watch Art, Cars & Collectibles: How to Mitigate Risk before Disaster Hits
• Read more about how climate change is affecting the art world and how collectors protect their investments.

OUR SERVICES

Understanding value is the cornerstone to effectively managing a collection – and at The Fine Art Group, it is this understanding that enables us to work as trusted fiduciaries for our clients, and their objects. We are experienced providing appraisals for a wide range of purposes, and are also specialists in unique and complicated appraisal scenarios.

Did the recent discovery of a copy of a Shakespeare First Folio at Mount Stuart, the Isle of Bute home of the Marquess of Bute, send you rushing to your shelves? If not, why not?

Even if you strongly suspected you didn’t own the First Folio, did you not for a moment entertain a pulse-racing, lingering doubt that you might at least have a copy of the Second, which has the additional value of containing the first appearance in print of another giant of English Literature, John Milton?
Even if the discovery didn’t prompt any such ambitious reaction, did it, though, at least suggest a return visit to those well stocked, double banked shelves, in the hope of finding something of value even it was unlikely to bear much comparison with that of a Shakespeare First Folio? (Good copies have fetched over £2m and up to £3.5m at auction). But might there, at least, be a good Dickens First Edition, or a James Bond, or even, a Harry Potter?

The first print run of Harry Potter and The Philosophers Stone consisted of 500 copies which retailed at £10.99 in 1997. A pristine copy can now fetch £15,000 to £20,000 at auction.

Recent years have seen substantial price rises for a number of categories of books such as travel, economics and science. Stanley Gibbons Investments recently published an index of valuable books based on past auction data. The most expensive title on the list was F. Scott Fitzgerald’s The Great Gatsby valued at £246,636 in 2015 with an increase in value of over 13 times since 1996 when it was priced at £18,056. The next most valuable on their list was The Hobbit by J R R Tolkien at £65,420, it having doubled its price of two years ago.

* Top ten first edition books that have seen the most growth. Source: Stanley Gibbons

These prices will have been achieved for copies in near mint condition. It is important to remember that condition is king and will hugely affect the price, along with other factors such as provenance, association, the presence or not of dust wrappers, etc. By and large, investment is best considered over the longer term. Pall Mall Art Advisors can source items or offer guidance on putting a collection together.

When did you last have your collection valued for insurance or other purposes? If books and manuscripts form part of trust assets, are they listed at current values? Books and manuscripts may provide a useful means of transferring wealth to succeeding generations or, if they meet the correct criteria, an opportunity for tax planning taking advantage of Acceptance in lieu or the Cultural Gifts Scheme.
If you would like to discuss any of these issues further, please get in touch. Our book and manuscript specialists John Sibbald and Dr Murray Simpson combine a wealth of knowledge and experience.

John Sibbald
Book & Manuscript Specialist UK
John Sibbald combines over forty years of library, antiquarian bookselling and auction experience.

Dr Murray Simpson
Book & Manuscript Specialist UK
Dr Murray Simpson was, until his retrial in 2008, Head of the Manuscript Division at the National Library of Scotland. His particular expertise equips Pall Mall Art Advisors to be leading specialists in archive valuations.

Researchers believe that 750 or fewer copies of the First Folio were printed, 234 survive today, of which 82 are in the Folger Library in Washington, DC.  If your collection lacks this treasure, you may, at least, console yourself by viewing a digital version here.  Alternatively, if the Shakespeare 400th anniversary celebrations are really enthusing you, there is at least one copy of the Second Folio currently on the market (around £275,000) –  although the dedicated collector might also want to think about the specialist Christie’s auction (25 May) comprising just four lots – a copy of each of the first four Folios.

OUR SERVICES

Offering expert Advisory across sectors, our dedicated Advisory and Sales Agency teams combine strategic insight with transparent advice to guide our clients seamlessly through the market. We always welcome the opportunity to discuss our strategies and services in depth.

When we think of the term ‘home invasion’ we tend to associate it with red-faced commentators on Fox-News. It is tempting to dismiss the tales of armed assailants waiting to smash into our homes to hold us hostage and to plunder our belongings as something that happens to other people in other countries (perhaps Mexico or Honduras).

Sadly however, this is not the case and the UK saw 1287 ‘home invasions’, or aggravated burglaries as they are known in the UK, occurring between 2014 and 2015. January 18th 2016 saw one such attack occurring in Birmingham where machete armed burglars broke into a house and stole £8000 of jewellery from a terrified family[1]. Another attack on a home in the Surrey area on the 19th January led to a family being attacked with crowbars whilst the burglars made off with a stash of gold[2].

Ten to fifteen years ago crimes such as the above would have more commonly taken place in locations such as Mayfair and Belgravia. These areas were once favoured hunting grounds for professional criminals due to the wealth of the residents, but this is now no longer the case, mostly due to vastly increased security. This does not mean that the rich of London are immune from crime. December 2015 saw an aggravated burglary at the home of Geraldine Winner (the wife of late film director Michael Winner). The widow was beaten, threatened and gagged while the attacker made off with jewellery and fine art[3]. Despite this, aggravated burglaries on the wealthy of London have become more infrequent and as the ultra-rich begin to slip out of criminals’ reach, new targets and locations begin to be selected.

In the present day, the most common targets of aggravated burglary tend to be individuals who live in the Home Counties or just inside the M25 commuter belt living in homes that range between £1million & £6million. They tend to be professionals such as lawyers, doctors or business owners who have two cars, two children and do their shopping at Waitrose. As these individuals have never been under any specific threat, they assume criminals will never target them.

Unfortunately it is this optimistic attitude towards security that unfortunately makes them ideal targets, as they will be unaware of the threats against them and will seldom (if ever) take security precautions.

WHAT DEFINES AGGRAVATED BURGLARY?

What defines an aggravated burglary (as opposed to the regular kind) is that the homeowner is present when the burglary takes place as well as the usage of a “firearm, imitation firearm, weapon of offence, or any explosive” used (or threatened to be used) during the course of a normal burglary.

THE CRIMINAL

Criminals that specialize in committing aggravated burglary tend not to be opportunists. Instead they tend to be professionals who work in groups and for whom crime is a way of life. There are several reasons for this: the first is that the use of violence results in much longer jail sentences, making the business of aggravated burglary a high risk one; the second is that for any group to be successful not just once, but several times without getting caught, requires care, patience and planning. Finally the increased media and police attention that comes from committing aggravated burglaries means that for a criminal group to be successful they need to be surprisingly disciplined to avoid capture.

THE TARGETING PHASE

Due to the greater risks for the criminals involved in committing aggravated burglaries, a significant amount of planning and research has to go in to every single crime as it only takes a single mistake for law enforcement to be given crucial clues that lead to an arrest. As well as this, criminals want to ensure that they select the ‘right’ target, one that has the highest reward for the lowest possible risk. After all, if one is going to face a significant jail sentence it should be for a suitable reward.

For a successful aggravated burglary to be carried out, a group must first pick a selection of targets, assess the risks involved and begin the planning process, all of which initially starts online.

The all-pervasive nature of cyberspace and the Internet has meant that criminals have never had greater access into the lives of their potential targets than they do presently. By using websites like 192.com[4] criminals can, in many instances, check who is living at an address. A small fee to the Land Registry or even a browse through websites such as Zoopla can bring up floor plans and information on the value of the house. Once names have been linked to addresses, a quick search of Companies House can reveal the names of related business directors and the potential value of their companies and assets. Finally, Google Maps and Google Street View can put you at the gates of a target’s house or view it from the air, allowing in some instances for security features to be mapped without having to visit the area in person.

All of the above techniques are (in part) similar to the methods that security and intelligence companies use to help their clients, but it would be naïve to suggest that they are the only ones.

Without leaving their desk, a skilled individual (legitimate or not) can often find the following about an individual all from the comfort of their home or office:

• Their place of address (192.com and the Land Registry)
• The value and floor-plan of their place of residence (Zoopla, Rightmove and the Land Registry)
• Any companies they might have and the estimated value of such companies via accounting information (Companies House)
• Places of work (Google and Companies House)
• Patterns of movement (Instagram, Facebook, online social and conventional media)

It is for reasons like the above that make publications such as Hello Magazine and Okay Magazine two of the most popular subscriptions in the British prison system! This is not due to inmates’ interest in Angelina Jolie’s latest adoption (though I’m sure they find her devotion to the less fortunate touching), but because it gives insight and information into the homes of the wealthy, all of which is very valuable to those criminals beginning the targeting phase of a job.

Once the criminals have a rough idea of the areas that they might be targeting or alternatively have a specific individual (or group of individuals) in mind, criminals can begin to establish what is known as a pattern of life. Our pattern of life is the ‘rhythm’ that governs our daily existence; when we get up, when we go to work and when we go out to socialize. Modern life forces us into easily predictable routines, where criminals rely on a predictable pattern of life to be able to effectively target potential victims. Using the information gathered during the target phase as well as observing their potential targets and their homes, criminals can build up ‘dossiers’ on multiple targets and then pick the ones that indicate the greatest chance for reward with the lowest possible risk.

GAINING ENTRY

Once criminals have established a pattern of life, they can work out the best moment to strike. For aggravated burglars this is not during the night or the early hours, instead mornings and afternoons are much more favoured. This is because at night, the roads are clearer and police more active. But, during rush hour in the morning and evening, response times are longer, police are busier and the shifts between their morning and evening at their station may be changing.

When attacking a property, speed and shock are crucial, criminals will often force entry when the homeowner is opening the door to go inside. Once access has been gained, the criminals will use violence or the threat of violence to gain access to valuables before making a swift exit. Valuables will often be buried and hidden nearby to be recovered weeks (or even months) after a burglary has taken place. This is to ensure the chances of the group being caught with stolen property are lowered and that when the group retrieves the valuables, the heat will have died down.

PREVENTION

It may seem that there is little defence against such groups who are both intelligent and well equipped, but this in truth is not the case. Individuals can take numerous steps to help safeguard themselves online and off and a simple place to start is to remove yourself from 192.com, this can be done by filling out a CO1 form.

Minimizing one’s online exposure is also a simple but effective tactic, though abdicating from social media is a touch extreme. One should be careful to ensure that the only information that exists online is information that is necessary for maintaining one’s social and business life.

It is also possible for vigilant homeowners to disrupt the targeting phase of a criminal group. Although there is little one can do regarding the online stage of the targeting phase (barring the removal of information from the web) there is a great deal that can be done to prevent or disrupt the physical targeting phase. This can include everything from increasing the security of one’s home to make it more of an unappealing target to spotting potential observers and informing the police. Most criminals will break off an attempted burglary or aggravated burglary if they feel that their targets have become aware of them as it increases the risk to unacceptable levels.

Although anonymity is an excellent form of defence, physical deterrent is often just as effective. When planning to commit a crime, criminals (using all the tools described above) will create a risk-profile of their prospective targets.
This means that the best way to keep one’s property safe to raise the risk above what a criminal group would likely deem to be acceptable. Though this will not likely stop a crime from taking place, it displaces the criminal threat to others around you. Though you may not be able to stop an aggravated burglary from taking place, you can take steps to ensure you are not the target. This tactic, though perhaps slightly cold-blooded is one of the most effective ways to keep one’s property safe.

THE IMPORTANCE OF INSURANCE

For many victims, though the police will doubtless try their best and security precautions such as the use of DNA marking on belongings will help recover stolen items, in reality often the only way of recovering the value of the lost assets is insurance. Just as important as the value of anything taken is the psychological trauma that an event such as an aggravated burglary causes. The event is an extremely traumatic experience for the victims and can leave them distressed for months afterwards. In some instances, this can lead to post-traumatic stress disorders as well as the physical effects. Counselling can help provide effective coping strategies. In some cases, even a child who wasn’t present during the attack can be affected afterwards. Failure to seek professional help could lead to longer-term issues.

Numerous specialist insurers have begun to recognize that the effects of crimes like aggravated burglary extend far beyond the financial impact and have taken a more holistic approach. Many brokers now have specific cover for aggravated burglary in their home policies. Expenses for psychiatric counselling, lost salaries, temporary relocations and for additional security to be installed in the affected home can all be provided.

Yet despite the financial and psychological help and security that some insurers can provide, many families do not have insurance that will protect them in the event of aggravated burglary.

The issue of under-insurance is widespread and according to Insurance Group Zurich, 80% of UK commercial properties are under-insured[5]. Though reducing insurance coverage may be seen as a sensible method of cutting costs to a household or business (especially when times are tight) in truth it can lead to catastrophe should the worst occur.

Human beings tend to have a comparatively optimistic outlook on the world in general and will often maintain hope that a situation will improve even when it almost certainly will not. The combination of natural optimism and a tight budget often make it tempting to simply ignore insurance as an unnecessary cost. Our optimism in the world around us is also reflected by the fact that though one in five new homeowners will change their bathroom or kitchen, only one in twelve will invest in additional home security [6].

Aggravated burglary is not an issue that is going to go away and as the UK (and many other nations) becomes more unequal the gulf between those who have and those who have not will only deepen. With combined government cuts steadily eating into police budgets, you are left with a situation ideal for criminal growth. As we stare into a more unequal and unstable future it would seem sensible to build our walls slightly higher and perhaps take another look at our home insurance policy.

[1] http://www.birminghammail.co.uk/news/midlands-news/couple-attacked-machetes-home-jewellery-10619129
[2] http://www.getsurrey.co.uk/news/surrey-news/terrifying-ordeal-sees-masked-men-10755100
[3] http://www.telegraph.co.uk/news/celebritynews/12047381/Michael-Winners-widow-to-make-Crimewatch-appeal-over-traumatic-attack.html
[4] http://www.192.com
[5] http://insider.zurich.co.uk/market-expertise/5-things-you-need-to-know-about-underinsurance/
[6] http://www.aviva.com/media/news/item/uk-homebuyers-spend-10000-doing-up-their-homes-in-the-first-year-17557/

Harry Chenevix-Trench is the Intelligence Manager at Blackstone Consultancy and specializes in open source research and risk analysis.

IS THE UK ART TRADE UNREGULATED?

Last year I was invited to be part of a panel at the Art Business Conference in London to discuss how the art trade can best protect its clients. It turned out that what some of the panel wanted to suggest was that the art trade was largely unregulated and that if the trade did not do more to correct this soon, regulation would be imposed on it from outside. I begged to differ and here is why.

To begin with it is simply not true to say that the trade is unregulated. A recent study by the British Art Market Federation lists 167 laws and regulations currently in force and applicable to the UK art market. Many of these are of wide application such as the Consumer Contracts Regulation, copyright regulations, the export control act or money laundering regulations. But others deal very specifically with the art trade such as the Artist’s Resale Right regulations, the Dealing in Cultural Objects Act, the Auctions Bidding Agreements acts etc. The combination of all these laws and regulations provides a pretty comprehensive framework and the art trade certainly does not feel unregulated from the inside. Rather than calling for still more regulation I think that the critics need to begin by explaining what gap it is we need to fill. We need fewer allegations and more facts.

One fact which seems to me insufficiently recognised is that, taking account of the size of the UK economy, the British art trade is by far the most successful in the world. We have twice as much as trade as the rest of the EU put together, 4 times as much as France, 10 times as much as Germany. We have just under a quarter of world trade, not so far behind the USA which has just over one third and whose GDP is about 8 times the size of ours. This success is something we should celebrate and brings huge benefits to our country. It is good for British artists hoping to sell their work, good for employment – the trade employs about 60,000 directly and a further 60,000 indirectly, good for the exchequer in terms of the tax we pay and good for tourism, encouraging wealthy people to visit this country. It is worth asking ourselves therefore just why our trade has been so successful. I have no doubt that there are a number of contributory factors but I believe that a very important one is that, unlike some others, we are not a country which instinctively feels that more government involvement and more regulation is part of the answer. I am not trying to say that there can never be a place for more regulation. But I would urge caution in rushing to fix something which seems to me very far from broken.

I also feel that too many observers looking at the art trade from the outside allow themselves to get carried away by the enormous prices paid at auction for a small number of exceptional works. Here therefore is another fact. The top 1530 lots sold at auction in 2014 accounted for 48% of the value of sales, but less than 0.5% of the number of transactions. 91% of the lots sold at auction went for less than €50,000. Still a lot of money, but not the sort of figure that the press loves to write about.

Looking from the dealer perspective however, I do worry about the number of dealers in the UK who do not belong to any trade association. About 1,000 dealers belong to the three main trade associations, SLAD, BADA and LAPADA, leaving about 7,000 who do not.  Of course some of these 7,000 are excellent dealers. But the point about buying from a dealer who belongs to a trade association is that you have an assurance that that dealer meets certain standards of competence and honesty and also have some means of redress if the purchase goes wrong and the dealer declines to settle the matter satisfactorily. If you buy from a dealer who does not belong and things go wrong you are left with the courts and that can be prohibitively expensive. We in SLAD are fairly strict about whom we accept as members but I would like to see more dealers joining one of the three associations. I would also like to find some way of getting it across to the wider public that they should be careful about buying from a dealer who does not belong to any of them.

I am also concerned about the rise of a new group of self-appointed intermediaries who attempt to sell objects they do not own and have no authority to sell. I know that many of our members are becoming more and more concerned about this phenomenon which seems to be on the increase but we are struggling at the moment to find an effective way of dealing with it. I can only urge members of the buying public to question the credentials of those they are dealing with and to check, if in doubt, whether they have the authority to sell what they are advertising.

And my final thought, just as important as regulation, is reputation. Regulations are essential but they are not always easy to enforce. But good dealers will themselves go to considerable lengths to establish and preserve their reputations, often going far beyond what the actual regulations require. Setting standards and helping to maintain reputations is also what the trade associations are all about, which is why I see them as playing such a crucial role in the art trade and would like to encourage all would be customers to keep them in mind when they are buying or selling art.

Christopher Battiscombe CMG is Director General of the Society of London Art Dealers

FURTHER READING

• The Asking Price #1: Understanding Value
• The Asking Price #2: Understanding Value

In this article, we look at the importance of legal and valuation advice in connection with the acquisition, ownership, and disposal of art and other valuable chattels by sale, gift, or estate tax planning.

THE ART MARKET

Two things are certain about the art market. The first is that art buyers and collectors are increasingly acquiring art and collectibles from an investment viewpoint.

The second is the increasingly heard complaint that the art market is not properly regulated, leading to a lack of transparency and access to authoritative sources of advice.

ART BUYERS & COLLECTORS

The 2015 European Art Fair Report (TEFAF), considered to be the authority on auctions, art fairs, and market trends, recorded the highest ever total value for sales in the art market in 2014. It reckoned the global art market totalled more than €51 billion ($53.9 billion U.S.), surpassing the annual sales figure for the 2007 pre-recession high of €48 billion ($51 billion).

The Report noted that the most popular acquisition in 2014 of the High Net Worth Individual was jewelry, gems and watches (29%), while antiques and collectibles ranked second (21%) with art representing 17% of sales.

The British art market, which accounts for 22% of the global market, is highly regulated, both at an EU and national level.

As at February 2015, it was estimated that there were 167 applicable laws and regulations affecting the market, including the Artist’s Resale Right Regulations, the Dealing in Cultural Objects (Offenses) Act, regulations under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES),  and the Auctions (Bidding Agreements) Act, to name but a few.

However, there are a number of significant issues that are specific to the art market, which still require addressing:

• no industry regulator
• conflicts of interest giving rise to confusion over commission charges
• lack of transparency over true ownership which can create title issues
• distortion of competition which can arise from auction house guarantees or similar activities and  which can amount to insider dealing
• third party valuation and appraisal is not regulated in the UK and many other countries

Other related issues are money laundering, tax evasion, corruption and fraud.

Improvements could be made by more effective enforcement of existing regulations, particularly in the areas of competition and criminal law. An important contribution too can be made by the purchaser, who is always better advised to deal with members of appropriate professional organizations.

The same caveat should apply when seeking professional valuation or sales advice.  Advice by an independent third-party professional adviser can provide both assurances as well as help achieve the most satisfactory financial outcome. While membership of a professional body is not an absolute guarantee of competence and honesty, it goes some way to establish credentials and may be helpful if something goes wrong.

THE ROLE OF THE LAWYER

In the context of owning, acquiring or disposing of art, there are three areas where a lawyer may be required to contribute.

REGULATION OF GENERAL APPLICATION

The first is the purchase or sale of a work of art (or jewelry, cars, guns, antique furniture), is subject to the usual range of property transaction legislation, such as that regulating the sale of goods, consumer contract, trade description, intellectual property, etc.
There could be a number of circumstances where it would be advisable for a lawyer to draft or review any contractual arrangements prior to purchase or disposal. It may also be advisable to have other ownership arrangement checked, such as contracts for transport, insurance or agreements for loans to museums or exhibitions.

ART SPECIFIC REGULATION

Secondly, there is a range of art-specific legislation where legal advice would be highly advisable.  Examples of this are the already mentioned CITES regulations to prevent international trade from threatening species.

Appropriate exemption certificates may have to be obtained even when the purposes of transport are not for sale. There is a lot of uncertainty in the application of CITES regulations and seeking legal advice may forestall trouble or seizure of valued items.

Another trap for the uninitiated and where legal guidance may be important is in connection with the Artist’s Resale Right known as ‘Droit de Suite’.

‘Droit de Suite’ is a royalty payable to a qualifying artist or the artist’s heirs each time a work is re-sold during the artist’s lifetime and for a period up to 70 years following the artist’s death, sellers need to be aware of this and should seek legal advice if it is an issue.

A new British copyright law comes into effect in 2020, which will restrict design rights on mass-produced items to 25 years. This may threaten the viability of museums, publishers and art-related businesses to work with artists and estates on reproduction rights. The changes are retroactive; meaning some cases where image rights have expired will be revived and the new legislation will make copyright breach a criminal, rather than a civil offense.

TAX RELATED ASPECTS

Artwork has become an important aspect of estate planning and administration because it can affect the estate’s overall value, resulting in substantial estate or inheritance taxes
The freeze of the Nil Rate Band has contributed to a significant rise in the total of IHT revenue for HMRC with rising house prices, asset prices and inflation, pushing more estates into IHT.

Legal advice should be sought on various steps to reduce an unnecessary tax including:

• lifetime gifts
• gifts with reservation of benefit
• Chattel Rental Schemes
• acceptance in lieu of IHT
• The Cultural Gifts Scheme
• Private treaty sales of a heritage item to a national museum or gallery.

Trusts, or alternatives such as a family investment company or family general partnership, often play an important part in preserving chattels from generation to generation and clearly the setting up of such an arrangement is the province of the lawyer. Again continuing legal advice during the lifetime of the trust will be important.

THE ROLE OF THE VALUER

Being aware of the correct and current values of art, jewelry and other valuable objects is of critical importance.

To meet the required criteria, a specialist valuer will be essential in setting out the arguments for the transfer of an object under an acceptance in lieu arrangement, the Cultural Gift Scheme or through sale by private treaty.

The valuer’s knowledge of market values will assist the lawyer in guiding trustees over assessing tax liabilities or on the disposal of assets for diversification purposes or raising income to meet anticipated tax liabilities.

Advice from an experienced, established and independent valuation business can offer confidence in the acquisition of new works or the sale of items.

Such assistance could also include negotiating auction house or gallery commission rates or arranging sale by private treaty.

Valuation and art advice services are the “glue” that connects the professional advice offered by lawyers, accountants, and wealth managers and the art professionals.

OUR SERVICES

Understanding value is the cornerstone to effectively managing a collection – and at The Fine Art Group, it is this understanding that enables us to work as trusted fiduciaries for our clients, and their objects. We are experienced providing appraisals for a wide range of purposes, and are also specialists in unique and complicated appraisal scenarios.