The legalities of art investment: do your homework


Art investors should exercise the same level of caution and attention to detail when negotiating an art purchase that they would put into buying real estate – yet often they fail to put all the necessary safeguards in place.  That is the view of Massimo Sterpi, a specialist in art law and a partner with Italian law firm Jacobacci & Associati.

“Most of the negotiations for buying art are very informal, so whereas people put in a lot of time and effort to negotiate the acquisition of real estate for instance, people spend many times more money to buy an artwork without paying too much attention to formalities,” he says. “There is also a psychological aspect to this: art is a very emotional acquisition. People tend to be willing to buy it at any cost, without ruining the pleasure of the acquisition by negotiating and going through the formalities.”

He emphasises, however, that the collector has the most leverage before the sale is completed, so this is the time to secure details such as any certificate of authenticity.

Authenticity is a particularly vexed issue at present because a significant number of important art foundations, including the Andy Warhol Foundation, the Jean-Michel Basquiat Estate and the Keith Haring Foundation, have ceased to offer authenticity certificates or to express any opinion on the authenticity of any works of art. This follows a number of high profile lawsuits in which the authority of art authentication boards has been challenged.

“Now you need to fine someone who can be proven to be sufficiently expert about the artist to be considered a reliable reference point by the auction houses and the market in general,” says Sterpi. When buying a work, he advises asking to see proof of authenticity well before any money changes hands.

“If you do make the mistake of getting the object and then starting to request an authenticity certificate or declaration of the gallery, at that point your leverage is almost zero because you have already paid,” he says. “You should do it before buying. At that point you can certainly obtain quite a bit of information – and if the information provided is unconvincing, you’d better stop.

“Of course, there is a relationship between the amount of effort you put in and the value of the object – if you are buying something that costs millions, you’d better invest accordingly.”

Besides evidence of authenticity, key considerations include wealth tax issues, contract formalities, restoration requirements, inheritance issues, transfer issues and any restrictions that might exist regarding the movement of work across borders. In Italy, for instance, any work over 50 years old is potentially deemed a national treasure and cannot leave the country without an export license.

“The impact on the value of the painting can be between 70-80%, so Italian collectors of contemporary art who want to be able to sell the work abroad will carefully scrutinise the date of the artwork and when they are approaching fifty years old they start exporting them and putting them in storage abroad,” he says.

In order to protect the resale value of any artworks you purchase, Sterpi recommends being scrupulous about keeping track of all receipts of payment, legal documents, letters exchanged with galleries, and any contact you had with the artist.

“Keep everything aside, because especially in the current scenario where the artists’ foundations are refusing to give authenticity certificates, all these materials will be very relevant to authenticity,” he says.

It is also advisable to pick and choose who you buy from: “Buying a painting from a gallery which is widely recognised as the primarily gallery for the artists means it’s 99.9% certain that you are buying an authentic piece, but if you have nothing but the painting on the wall and nothing traceable about the provenance, the movement and the history of the work, that becomes difficult,” says Sterpi.

If you exercise the right precautions, Sterpi’s view is that investing in art is an attractive, if unpredictable option.

“Art is a very risky investment but nevertheless it does have advantages,” he says. “High net worth individuals tend to dedicate a big portion of their portfolio to art, because it is very movable – to move real estate is not easy, yet you can move a piece of art to another country in a couple of hours. For a portfolio to be safe it should be diversified, and clearly to have some art is not a bad idea.

“However, I wouldn’t encourage people to put most of their assets into art. You shouldn’t buy art just because it’s an investment, you should always buy art if you love it. It might be a good investment but that’s just a possibility – never rely on art as your asset.”

Massimo Sterpi

Massimo Sterpi