WYWH: Legal Primer for Artists: Leasing Commercial and Residential Space & Dealing with Tax Issues

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Preoccupied with their work, artists often neglect reaching out to accountants and attorneys for advice on how best to brace themselves for possible issues they may encounter. Among an artist’s various legal considerations, contracts are perhaps the most important. Contracts can be forged for consignment agreements with galleries and auction houses or for the rental of commercial and personal leases. Although contracts are invaluable for artists, a litany of complications accompany the process of facilitating, signing and executing them.

On Thursday, June 9, 2016, New York Foundation for the Arts (NYFA), in cooperation with the New York State Bar Association’s Entertainment, Arts, and Sports Law Section (EASL) and EASL’s Committee on Fine Art, gathered a panel of attorneys to offer basic legal information to artists. Attendees also included attorneys and students. The two-hour information session featured three speakers, all of whom shared valuable insights into issues pertaining to leasing commercial space, the rights of artists as residential tenants, and income and sales tax issues. The discussion was moderated by the co-chairs of EASL’s Committee on Fine Arts: Carol Steinberg, Esq. and Judith Prowda, Esq.

The first panelist to present was Jill A. Ellman, Esq. She is currently an Associate at M. Ross Associates, LLC, a law firm that handles all aspects of complex commercial litigations as well as transactional matters. Ellman focused on commercial leasing and how artists can ensure that they are protected from predatory practices such as exorbitant rent hikes, unauthorized changes to the lease and liability.

The second panelist to speak was David Frazer, Esq., Of Counsel to Himmelstein, McConnell, Gribben, Donoghue & Joseph, LLP. Having dedicated much of his career to advocating the rights of tenants, Frazer offered important advice concerning how artists can obtain the best leases while also protecting themselves. Frazer took great care to stress that artists “should not cut corners,” as record keeping is crucial to protecting one’s own personal interests. If a landlord or tenant requests any modifications to the lease, artists are encouraged to have the alterations signed by the landlord in writing and corroborated by all affected parties. Creating a paper trail of alterations to consignment agreements or real estate transactions helps protect the artist/tenant from possible abuses and in the event of future litigation.

Patricia Pernes, Esq., a Tax Consultant in the Business Tax Services sector and Art & Finance Group of a Big Four accounting firm, echoed Frazer’s sentiments regarding an artist’s responsibility to exercise due diligence in all formal transactions. Pernes, however, shifted the conversation from leasing issues to tax deductions applicable to artistic labor and the pieces themselves. Throughout her presentation, Pernes emphasized the distinction between a business and hobby, with the former classification being adequate for the deduction of materials and work-related expenses and the latter not receiving such protection. The principle element is whether the work is created in furtherance of a profit-driven business, in which case tax deductions can be used to incentivize growth. As with contracts, good record keeping is important for tax deductions as well.

The formal discussion was followed by a lively questions and answers session where attendees were able to ask the attorneys about legal provisions specific to their craft. Questions ranged from deductions that can be claimed by musicians for research to leasing for art nonprofit organizations. Ellman, Pernes and Frazer took the time to delve into each question’s nuance, applying their expertise to a motley of hypothetical situations and concluding what was, indeed, a priceless evening.

Disclaimer: This article is for educational purposes only and is not meant to provide legal advice. Readers should not construe or rely on any comment or statement in this article as legal advice. Instead, readers should seek an attorney.

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