What Collectors Should Know Before Saying Yes to a Museum or Gallery Loan
Observer ·
Collectors approached by curators should settle questions of transport, conservation, credit, copyright and liability before any works leave their walls. But with the right agreement, experts tell Observer, both lender and institution can benefit.
A request comes in from a museum curator: “We’d like to borrow your Monet for an exhibition we are planning for next fall.” A collector’s first reaction is likely to be ‘wow,’ as they think about the bragging rights that come with having a piece from one’s holdings featured in a major exhibition—and of the possibility that the Monet may be worth a lot more once the exhibition closes. It’s an understandable response, but collectors need to pause and consider that a loan request is only the first step in a process that can involve complicated negotiations and complex contracts.
But let’s let that initial enthusiasm simmer a bit. When an artwork appears in a museum exhibition, “you now have proof that the piece is museum-quality,” Michael Duffy , head of art planning at Merrill Strategic Wealth Advisory Group, told Observer. “It has a very positive effect, lifting the exit price of an artwork.” Museums don’t want to be seen as the “marketing arm of a collector,” he added. But the research their curators and scholars conduct on individual pieces, including checking provenance (its history of ownership) and provenience (an archaeological term for exactly where an object was found), assures prospective buyers that a work has a level of acceptance and desirability. Museums are generally quite good at handling, displaying, labeling, conserving and guarding the objects in their care, so it’s easy to feel comfortable lending to them.
It’s a win for museums, too, since displaying art is their mission and loans let them show works beyond their own collections. Some museums mount exhibitions drawn entirely from their own galleries and storage, but most need to borrow from other museums and from private collectors to put together truly comprehensive shows. A better, fuller exhibition draws more visitors, which brings in more admissions and other revenue.
Once the collector and the museum agree that the Monet is a good fit, it’s time to work out the specifics. Loan agreements between collectors and museums are nothing new, and they have always run to pages and pages. These contracts set out the term of the loan, with start and end dates, whether the object will travel to other museums and whether the lender will be invited to openings. They also spell out how the work will be displayed: where in the institution, how it will be lit, how it will be attributed and discussed on labels and in catalogues and brochures and whether the lender will be named or simply identified as a “private collector.” From there, they specify who conducts condition reports before and after an object is moved and who performs any needed restoration or conservation and address any copyright concerns, since the museum must have the rights to photograph a piece before using its image in brochures, in catalogues or on merchandise. And on top of all that, artwork loan agreements determine who pays for packing, transporting, installing and insuring the work.
Lenders usually have their own lawyers draw up these papers, though these agreements also commonly include a force majeure clause, which releases the institution from legal liability if something drastic and unforeseen occurs, such as an earthquake or violent weather, a work stoppage, an insect infestation, terrorism or war.
Things can get complicated if a borrowed work has gaps in its provenance or may have come from a part of the world with a history of looting . Claims that an artwork should be repatriated or returned to a previous owner—or that owner’s family—may be a source of worry, especially when the work is being shown in a foreign museum. New York lawyer Amelia Brankov told Observer that, “as part of the loan negotiation process, a collector lending an artwork who is concerned about potential seizure of the work while abroad can consider asking the museum to apply for immunity from seizure while on temporary exhibition under any available local anti-seizure law.” In such cases, however, the collector’s lawyer may simply advise against lending the object at all or, if it is lent, recommend that the collector not be named on any label or in any catalogue.
Loan agreements may additionally cover nearly every conceivable scenario. A museum might go bankrupt, and its creditors might try to seize its assets to cover its debts. (Duffy reminds his collector clients to file a UCC-1 form with the secretary of state’s office, which gives lenders priority over other creditors in recovering their artworks.) In the case of long-term loans, a museum might forget that a work was on loan rather than part of its collection and sell it, which usually leads to lawsuits filed by the owners to recover the object or the amount paid for it.
Most museums have their own boilerplate forms—some lengthy, others short, all negotiable. New York City lawyer William Pearlstein told Observer that “the Metropolitan Museum’s intake form for gifts and loans is laughably cursory and inadequate to protect either the museum or its donors by requiring customary representations, warranties and indemnities regarding title, provenance, provenience, etc. This is a dicey practice that may trace back to the years of Thomas Hoving and Ashton Hawkins when the thinking was that the less said the better.”
Institutions have some leverage simply because collectors have egos, but those collectors also have leverage of their own. “Some collectors may be thinking about their estates, wanting to place their works in museums,” Manhattan lawyer Susan Duke Biederman told Observer. “They may have a few things that the museum wants and a lot of things that the museum isn’t interested in but, if the artwork that the museum wants to borrow is important enough for the exhibit that the museum is preparing, the museum might agree to take a collector’s entire collection, or a lot of it,” for the chance to temporarily show that one Monet. A loan agreement, she added, “is a good opportunity to resolve other issues.”
Museums aren’t the only ones that borrow from collectors. Commercial galleries may also seek loans, either to give a fuller picture of an artist in a solo exhibition or for thematic shows of their own. Being asked to lend a work is a tribute to the collector, according to Jonathan M. Freiman , a partner at the law firm Wiggin and Dana. “If a gallery or museum wants to show something, the collector must have chosen the right thing to buy.” As mentioned above, a loan can also raise the value of the piece, since artworks that appear in shows draw attention “from the press, critics and sometimes art historians.”
Still, galleries and museums are very different entities, Freiman pointed out. “A gallery’s primary mission is to sell art; a museum’s mission is to display it. Private art collectors most often ‘lend’ objects to commercial galleries when they want the gallery to sell their work. In legal terms, that’s a consignment, not a loan.” Making sure the gallery understands the difference is crucial.
Collectors negotiate loan agreements with galleries the same way they would with a museum. The gallery is often responsible for crating, shipping, unpacking and repacking, any permitted conservation, insurance (the lender might be made an “additional named insured” to have more say over coverage amounts), condition reports and setting the term of the loan. Importantly, “all gallery sales staff shall be told in writing and orally that any inquiries about purchasing the artwork must be responded to by stating that the artwork is not for sale and that the Gallery will not communicate any offers to the owner,” New York City lawyer John R. Cahill told Observer. The loan agreement should also state that the work is not being consigned and that the borrower may not offer it for sale, and a label next to the artwork should unequivocally inform visitors that ‘This Artwork is on Loan and Is Not for Sale.’
It’s rare but not unheard of for galleries to sell borrowed works. Daniel H. Weiner , a partner at the law firm Hughes Hubbard & Reed, told Observer that the form “typically includes language that addresses loss of the loaned object under any circumstances, which would cover situations where the gallery intentionally or accidentally sold the object.” If that happens, the lender would need to find out where the artwork is, whether still in the U.S. or abroad, and pursue a claim against the buyer, who would not hold a valid title. “It can be hard to put the genie back in the bottle and, depending on the facts, the lender may only be left with a claim for monetary damages against the gallery and can’t recover the artwork from a purchaser,” Brankov explained. She recommended that collectors research a gallery before lending to it. That means checking with the secretary of state’s office in the gallery’s state for any liens that might let a bank or other creditor claim priority over the owner, and asking other galleries in the area, or other collectors familiar with the gallery, whether it is financially sound.