What you need to know before buying art at public auction

Despite all signs pointing towards economically more challenging times, London remains a centre of the international art market and home to the world’s leading auction houses. Important auction sales regularly make the news headlines, as has been the case with the recent $1.5bn sale of Microsoft co-founder Paul Allen’s art collection in New York. However, behind the glamour and the headlines, collectors must ensure that they are aware of the risks and their rights when acquiring art at public auction.

In this article, our art and cultural heritage partner Gregor Kleinknecht outlines what to consider before buying art at a public auction.

Do your due diligence

Consumer protection legislation will often provide a remedy to an unwary private buyer when an art purchase goes wrong; however, many of these rules do not apply when artworks are sold and bought at public auction. The maxim caveat emptor applies nowhere more than at public auction. Not only are the buyer’s legal rights and remedies limited by law but the terms and conditions of sale applied by auction houses are often restrictive, and claims can be subject to very short contractual exclusion periods. Buyers must ensure they carry out any due diligence in advance of the sale; doing it after may be too late if buying via public auction.

Who is the seller?

Auction houses can sell either on their own account (for example, if they previously bought in a work that would otherwise have gone unsold) or on behalf of a consignor. Always ask who the seller is and evidence to accompany the assertion. The auction house should provide proof that the seller is either the owner of the artwork, or is entitled to sell the artwork on behalf of the owner; and, secondly, that the artwork is free from liens and third-party rights and that the buyer will acquire the unencumbered title.

Authenticity and attribution

Check whether there is a known attribution to the artist, for example, in a catalogue raisonné. When buying an Old Master painting, obtain expert advice on the authenticity and attribution of the artwork before making the purchase. Auction houses often use convoluted terminology to describe authorship and the lines between an autograph and studio work can be fluid. Challenging authenticity post-sale is not recommended as it can be difficult and expensive. Modern and contemporary artworks should be authenticated by the artist’s studio or estate and should always be accompanied by a certificate of authenticity. Beware recent re-attributions that increase the value of an artwork.

Provenance

Enquire about the ownership history of the artwork, and identify possible gaps in provenance that could hide historic claims. A complete and fully documented provenance adds to the value of any artwork and should include confirmation that the artwork has not been recorded as lost or stolen. If an artwork has been imported from overseas, make sure any export permits that may have been required from the source country are available.

Condition
An auction house can provide a condition report. This is recommended especially to investigate further if there are signs that an artwork may have been repaired or restored. Heavy or clumsy restorations, or the use of incorrect materials, will decrease the value of an artwork.

Price
Obtain an independent valuation of the artwork and compare market data if the artwork was more recently sold. Market comparables can be obtained quite readily through publicly accessible resources; however, expert input is advised, especially if it is a very expensive purchase. When bidding, remember that the sales estimate advertised in the catalogue will not be the final price. The auction house will add buyer’s premium to the hammer price, and the buyer may also be responsible for VAT payments and import duties if the artwork has come to the UK on a temporary import basis. A resale royalty to the artist may also be payable.

Post-sale
Ensure you receive a written invoice that includes all of the details of the artwork in accordance with the catalogue description, together with any supporting documents. Buyers will normally be responsible for collection or shipping arrangements. Put insurance cover in place from the time when risk of loss and damage passes to the buyer under the auction house’s terms and conditions of sale to avoid any additional costs; this may have to include transport and transit cover of the artwork.

If you are considering buying artwork but would like to know more about your rights before doing so, please contact Gregor Kleinknecht.