Know your legal rights when buying fine art

Collecting art requires a great deal of trust. You have to trust your tastes, the art dealer, and the market. Even when trust is built on knowledge, consumers need to be aware of their legal rights to be able to negotiate better deals for themselves.

One of the major legal provisions is that an object has to be what the dealer says it is -- known as the warranty of authenticity. Fakes and forgeries as well as objects that are misattributed (for instance, a ``Rembrandt'' painting actually being from the ``School of Rembrandt'') must be taken back by the dealer, if the sale was based on the works being authentic, for the money paid for them.

This has become standard practice with dealers, except where there is a disagreement over what was said about a work or a dispute over the object's authenticity. Then the problem may well find its way into court.

Another area of law that may, however, lead to litigation involves the proper transfer of title. A dealer must either own the work of art or be empowered to sell it, but complications may arise when a stolen object comes onto the market.

Often, works pass through a variety of hands before they are discovered to have been stolen, and a chain of lawsuits may result when the last owners demand the money paid for the objects from the previous ones.

One such legal domino game occurred in 1969. Erna Menzel discovered that a Chagall painting she had left behind in her native Belgium, when she fled that country for the United States in the wake of the invading Nazi armies in 1940, turned up in the collection of Albert List, a New York collector.

The Nazis had confiscated the painting. After a few sales, it came into the hands of a Parisian dealer who sold it to List. The suit by Mrs. Menzel against List was relatively straightforward, involving proof of her previous ownership, though the courts subsequently had to decide whether List should be reimbursed by the dealer for what he had originally paid for the work ($4,000) or its then current fair market value ($22,500). List received the larger amount; Menzel got the painting back.

Five states (California, Hawaii, Illinois, Maryland, and New York) have print-disclosure laws that require dealers to tell prospective buyers whether the graphic work they are purchasing is part of a limited edition, the size of the edition, and whether the plate is still in existence and can be used to print others.

Increasingly, art collectors in other states are asking dealers for much the same information in writing, and a growing number of print publishers are attaching certificates with this sort of information to each work they run off.

Beyond this point, laws are not what define generally accepted conduct, and agreements must be negotiated between the collector and the dealer.

Some dealers will agree to buy back any work they sell to a collector for the original price (within a certain period of time, provided the work is not damaged in the meantime), and others will permit prospective buyers to take a piece home with them to see if they like it. Still others will allow a collector to take possession of a work and not have to begin paying for 90 to 120 days.

``In some cases, a dealer will let a collector trade one work for another,'' says Gilbert Edelson, counsel to the Art Dealers Association. ``I've even heard of instances where something other than art, such as jewelry, is used in a trade. Everything is OK as long as both parties agree.''

A work that has been so heavily restored that the original painting is largely obliterated may bring up the question of its authenticity.

``There has been no law on this yet,'' Mr. Edelson says, but he adds that some restoration might be considered a ``breach of authenticity'' and that collectors should be ``wary of overly fresh-looking old masters.''

There may be other areas, however, where the respective interests of collectors and dealers do not so neatly coincide. Dealers may be reluctant to discuss the amount of restoration -- which includes overpainting and repainting -- that has been done to a picture, but collectors should always ask many questions, especially for works of 100 years or older.

There are other concerns for collectors when they seek to sell a work through an art dealer. One is that the dealer agree in writing (usually on the consignment agreement) to insure the work at its full value and pay all restoration costs in case of damage. A collector may also choose to make a legal claim against the dealer in the event of damage that diminishes the value of the object.

No customary percentage exists in the trade for the dealer's commission: It may range from 10 to 50 percent, depending upon the value of the piece, its rarity, and the stature of the artist. A very rare work or one done by a well-known artist, hence with a higher price, might put the collector in a better position to demand a lower commission than for a work that is not likely to sell as easily or for as much money.

It is also wise to see the sales receipt for the consigned work after it is sold to ensure that the dealer has not taken too high a commission or paid the collector too little.

Art galleries are notoriously poorly financed operations, which often use today's sale to pay yesterday's debt, and many artists have had to find recourse in the courts when a dealer withheld money owed them.

Collectors who consign works to art galleries may have the same problems. Fifteen states (Arizona, Arkansas, California, Colorado, Connecticut, Maryland, Massachusetts, Michigan, Minnesota, New Mexico, New York, Oregon, Texas, Washington, and Wisconsin) have enacted laws that now protect an artist-consignor's works from being seized by creditors if the gallery should go bankrupt.

These laws, however, do not apply to ordinary collectors who consign their works to a gallery, but a financing statement, agreed upon and signed by both the collector and dealer, will offer the needed protection.

Collectors, of course, have other options as well, including buying directly from artists -- which may be less expensive, since there is no dealer commission -- or from auction houses.