Folding the White Cube: What Is Transforming the Gallery Scene in NYC?

by Alexandra Terrell*

Screen Shot 2017-07-19 at 4.29.31 PMSpeaking at a Stropheus Art Law event entitled “Letting Go of Brick and Mortar: The Future of the Gallery” in September 2016, Josh Baer noted that the notorious art scene in the Big Apple has always changed cyclically. He questioned, “How many [galleries] are going to be flourishing 5, 10, 20 years from now? I’m going to say not many. And it’s always been that way.” Several quintessential New York City galleries affirm Baer’s prediction. On Stellar Rays, Andrea Rosen Gallery, and Mike Weiss Gallery, amongst others, have recently closed their doors for good. Small and midsize galleries, which often play a pivotal role in helping promote emerging artists (JTT with Damon Zucconi and Sargent’s Daughters with Cy Gavin are two examples), have a hard time surviving New York City’s ever-changing and always-demanding “make it or else” zeitgeist, much like the artists they represent. With an influx of artist-types comes gentrification, followed by higher property taxes, and when the lease expires, a higher rental rate to renew. When these increases in overhead become unsustainable, galleries often move to more affordable areas, starting the cycle all over again. Today, some might call the process hypergentrification because it seems to have heightened and accelerated, with property taxes and rental rates skyrocketing to stratospheric levels and landlords unwilling to negotiate longer-term leases.

The Internet plays an important role in the changing art market, as do art fairs—galleries are no longer the sole source of viewership for an artist. Artists often display their work directly to an audience online, eliciting sales and promoting their work without the help of a gallery. As Michael Foley of Foley Gallery aptly puts it, “The things that gallerists have embraced over the years as additional tools may ultimately be our undoing.”  At the same time, however, the gallery offers a viewing experience that the dimensionless white space of the Internet cannot. It’s impossible to smell the paint or perceive a piece’s physical presence through the interface of a computer screen. To reconcile the innovations of the Internet age and costly real estate with the necessity of what Josh Baer describes as a “chemical view of art”, new models of gallerist-artist-client relationships have arisen, expanding the ways in which art is presented to the public. However, with diversified roles and the use of non-traditional spaces, gallerists take on new legal responsibilities.

The Essence of the Problem

Gallerists in New York City list many reasons for abandoning their brick-and-mortar spaces—the rise of art fairs, the burgeoning online art market, the desire to retreat from the grind of the art-industrial complex, and the changing nature of the art itself. Some even blame closed-minded clientele. Collectors have shifted their focus to “market-tested trophy works”, often buying such works online without viewing them in person. Because these works tend to be the domain of blue-chip galleries with multiple locations, they are the ones benefitting disproportionately from the online market while small and midsize galleries suffer.

In a recent article in the New York Times, Robin Pogrebin notes a widening economic divide between small galleries and large ones. She attributes this phenomenon to the exorbitant cost of real estate as well as the proliferation of expensive art fairs. Participating in certain art fairs can cost a gallery hundreds of thousands of dollars, virtually shutting out any gallery pulling in less than seven figures annually. Economic factors are not the only barrier to showing at major art fairs. Many are quite selective when choosing exhibitors, opting for galleries that represent well-recognized artists over those that promote emerging ones. According to The European Fine Art Foundation’s 2017 Economic Report, art fairs account to up to 41% of sales across the industry. Not only do small and midsize galleries not benefit from those sales, they have also witnessed a noticeable decline in foot traffic, diminishing their overall sales and forcing them to rely more heavily on their most loyal clients. While there is no obvious response to the economic impact of art fairs and the Internet on small and midsize galleries, it is easier to pin down a solution to rising real estate costs.

In March 2016, the Center for Art Law hosted a panel at Minus Space highlighting the central role the real estate market plays in the arts. Adam Sheffer, the president of the Art Dealers Association of America, relates that “you can never underestimate the significance of the relationship between the real estate and art markets.” Over the course of the post-war period, gallery hotspots shifted around the city, from the Upper East Side to Midtown to Soho to Chelsea to Williamsburg.  Because of the rent increases in Chelsea and the Meatpacking District, galleries there began searching for alternatives. As early as 2001, galleries started making the move from Chelsea to the Lower East Side and Chinatown, where the majority of locations are smaller and are often run by independent landlords. Pierogi Gallery, run by Joe Amrhein and Susan Swenson, made the leap from Williamsburg to the Lower East Side to escape rents that are just as high as those in Chelsea. Prices in the Lower East Side range from $100-$145 per square foot, but because of the smaller spaces available, the overall costs are less. For larger spaces on the Bowery, rents can go up to $200 per square foot, likely because of the willingness of more profitable tenants—hotels and restaurants, for example—to take on such high rates in the area.

In the mid-2000s, rent in Chelsea fell between $90-$100 per square foot. Compare that to today, when rent on the “best blocks” can be $120-$145 per square foot. With spaces ranging in size from 1500 – 5000 square feet, only well-established blue-chip galleries have any hope of sustaining further increases.  Few spaces can still be found for below $100 per square foot.  One prevailing condition guarantees a bit of stability for galleries in Chelsea—retailers have been hesitant to move in. As a result, the rental rates are also highly dependent on what galleries are willing to pay. If no gallery can pay the rate, the space sits empty. With the Hudson Yards development being erected just above Chelsea, the situation may change.  However, the upside is that with these upscale residences moving in, more affluent clientele move in as well.

Rent is expected to continue to increase even in lower-priced regions—the Lower East Side, Williamsburg, and Bushwick—so galleries remain in search of less charted areas. For some, that means Harlem, for others, it means Queens. A few have gone even further outside traditional realms, changing course and representing artists in the absence of a brick-and-mortar space.

The Source of High Rental Rates

How is it that rent can continue to increase? The answer is pretty simple: there is no commercial rent control law in New York. New York City had one from 1945 to 1963, but when it expired, there was little impetus to renew it because, as James Parrott, the deputy director and chief economist of the Fiscal Policy Institute, explains, “the real estate community has always been aggressive in campaign contributions… and, by doing so, they’ve successfully prevented anything that would restrict them.”

Where rent control is nonexistent, a gallery’s saving grace can be the terms of its lease agreement.  Commercial lease agreements are often the result of an extensive negotiation process. Critical terms can make or break the leasing business. These terms include the length of the lease, the rent and any allowable increases, whether insurance, property taxes and maintenance costs are included in the rental rate or paid separately, and how disputes are to be settled.

There are two major types of commercial lease: a gross commercial lease and a commercial net lease. In a gross commercial lease, the tenant pays the landlord a fixed monthly fee. It is the landlord’s responsibility to cover all operating expenses of the building, including liability insurance and property taxes. This type of lease may initially be more expensive than a net lease, but it can protect the tenant should operating costs increase in the future. In a commercial net lease, the tenant is responsible for paying some of the operating costs of the building. These most commonly include property taxes, insurance, and maintenance, usually all based on the proportion of rentable space the tenant is leasing. When all three expenses are included, the lease is called a “triple net lease”. Negotiating these terms can be complex.

The ideal situation is one in which the tenant does not face unexpected costs in the middle of a lease. It is not uncommon for landlords to include a “Compliance with Laws” clause in the lease agreement. This clause can place responsibility on the tenant to ensure the building is up to code in compliance with the law, exposing the tenant to the expenses of unanticipated renovations and upgrades.  A tenant-friendly clause should require that the landlord warrant that the building is in compliance at the time the tenant takes possession. This limits the tenant’s responsibility for any non-compliance that existed before occupancy. If the tenant is moving into a space that was previously occupied by a similar business, the agreement should require the landlord to warrant that the space is code-compliant for the intended business activities. If the tenant agrees to take on additional compliance responsibilities, they should be very clearly specified within the lease.

Depending on which type of lease is secured, property tax increases are another variable that can desiccate a gallery’s finances. The Official Website of the City of New York provides information about how annual property tax rates are calculated. The Department of Finance determines the market value of the property, which differs depending on the class of property in question. In New York City, there are four property classes. All commercial and industrial properties, including office and retail buildings are included in Class 4. For Class 4 properties, the Department of Finance bases its market value calculation on income earning potential and expenses as well as some statistical modeling. This figure is multiplied by 45% to determine the assessed value of the property. The assessed value is then multiplied by the property tax rate—in the case of Class 4 properties, the tax rate is 10.6%. Within this calculation, the property’s market value is the biggest unknown, and it is the culprit for the escalating property taxes. Betty Cuningham, who moved her gallery to the Lower East Side in 2014, recounts, “Chelsea was getting way too expensive; our real estate taxes alone had gone from $1,500 the second year to $42,000 the last year.” With this wild card in the mix, the need for a fair lease agreement, one that might mitigate the damage of an unexpected tax increase, becomes exceedingly apparent.

The landlord, who typically has more experience in negotiations and holds greater bargaining power over the process, often drafts the final lease agreement. Under such circumstances, it is not difficult for a landlord to draft an agreement that favors his or her interests. Given the complexities involved in negotiating a commercial lease and the clear inequality of bargaining power between small business owners and real estate monoliths, a solution is required. It need not be novel. In fact, it may already exist.

Legislative Change: The Small Business Jobs Survival Act

Rewind back to the mid-1980s when City Council Member Ruth Messinger proposed the Small Business Jobs Survival Act (“SBJSA”). The SBJSA and its New York State counterpart, the Small Business Survival Act (“SBSA”), aim to rebalance the bargaining power through two major provisions. The first is that, barring certain exceptional circumstances enumerated in the SBJSA, the tenant has a right to demand a 10-year lease renewal. This counteracts the tendency for landlords to offer only shorter-term leases to capitalize on their ability to hike the rent once a lease expires. Additionally, if the tenant considers the terms of a lease renewal unacceptable, the SBJSA prescribes a very detailed arbitration process. Even at the end of that process, should the tenant remain unhappy with the agreed-upon rent, he or she can elect to pay the previous rental rate plus 10% without penalty.

The SBJSA has been discussed in City Council intermittently for the past 30 years. In recent years, the exponential rate of rent inflation and the resulting number of small business closures have brought the SBJSA back into focus. Though it would take some major lobbying to enact it, the SBJSA remains a viable solution to the devastating effects of skyrocketing real estate prices. Increased vacancies have so affected the streetscape that a website called Vacant New York has been established to document them. The dire situation has pushed City Council to discuss not only the SBJSA, but also the possibility of exempting small businesses from Commercial Rent Tax or introducing tax incentives for landlords to maintain their current rental rates. While organizations like Two Trees offer subsidies to cultural spaces to offset operational costs, there are not nearly enough available to aid every gallery in need. Instead of waiting for additional funding or legislative change, gallerists have gotten creative, crafting inventive solutions to overcome their financial plight and stay loyal to their artists and clients.

Creative Solutions and Their Legal Implications

Galleries are traditionally thought to be pristine white cubical spaces, static and permanent, changing only due to the art they exhibit. Owing primarily to the tough economic climate of New York’s real estate market, gallerists have had to be increasingly flexible, dynamic, and sometimes even nomadic. While some have chosen to relocate to evade financial straits, it seems even that is not a viable long-term solution. Many gallerists have accordingly chosen more radical revisions of their business model.

With established patronage and strong artist loyalty, some gallerists choose to move away from the City altogether and seek out cheaper locales from which to conduct their business. This has worked for Bill Brady, who owned ATM Gallery on 27th Street in NYC before moving to Kansas City to open up Bill Brady Gallery.  Then there are Monya Rowe who moved her gallery to St. Augustine, Florida and Jeff Bailey who moved to Hudson, New York. All three maintain a strong presence in the art market despite their more remote headquarters.

An increasingly popular solution to unsustainable real estate prices has been to adopt a pop-up model. In an interview with Stropheus Art Law, Sasha Wolf describes that she decided to vacate her brick-and-mortar space for a multitude of reasons. The most compelling reason for her, however, was increased freedom—both personal and economic. She retreated from public view, pulling the artists she represents with her. Her clients had few qualms about the increased privacy, but her artists rely on their works being shown to the public. To resolve this, Sasha organizes pop-up exhibitions. For her, this model offers her the opportunity to work at her own pace, maintain variety in her daily routine, and spend more time away from New York to meet with clients and artists. For her clients, it offers a greater sense of exclusivity and a more intimate transactional experience. For her artists, it allows them to have a say in choosing the space in which they show their work and maintains their public presence. In the same interview, David Dixon describes that there is certainly some appeal to showing in varied spaces. Artists can play a more curatorial role in finding a space specifically suited to their work or one that casts it in a new light. Without the pressure to keep pace with surrounding galleries, there seem to be fewer entrenched rules for a pop-up exhibition, which can be as short as a day or as long as a few weeks.

Another form of gallery ownership is the seasonal gallery, which offers a consistent physical space with temporal flexibility. One example is Topless at 91-02 Rockaway Beach Boulevard. Jenni Crain and Brent Birnbaum, co-founders and co-directors, revive the space each summer to stage four three-week shows from mid-June to late August. Running pop-up and seasonal spaces rather than year-round brick-and-mortar locations can free up a gallerist’s time and resources so that they can travel to art fairs without significant overhead.

For some gallery owners, staying afloat means diversifying the business and scaling up. This can be through the addition of a coffee shop or bookstore, or by transforming part of the space into a bar or dance venue by night. In the late 1980s, Gavin Brown had the idea to open up the bar Passerby adjacent to his West 15th Street gallery space, Gavin Brown’s enterprise. With a dance floor designed and installed by artist Piotr Uklanski, the venue attracted an eclectic mix of the subcultural elite. Even with his imaginative business model and memorable exhibitions, however, in 2014, Gavin Brown was forced to relocate when a developer bought his headquarters. In 2016, he opened a new space in a 19th-century building in Harlem after a complex renovation process.  The Knockdown Center took a different approach to diversification. It has a bar, yes, but the owners, artists Michael Merck and Tyler Myers, went one step further. They rent out parts of the 60,000 square foot refurbished brick factory for events—anything  from weddings to beer festivals.

Other galleries thrive by moving off the beaten path not only in terms of location, but also in the nature the space itself. Hood Gallery is a converted shipping container in Bushwick. Founded by Tom Koehler in 2013, the space is dry-walled and has electricity, but no heat. The unique space acts as a medium, often inspiring the final form of an artist’s exhibition. It is a space that provokes experimentation. Add to that its lack of an official website and its hidden locale, it is unsurprising that it has fashioned a scene unto itself.

Still other gallerists have put a more personal spin on the shifting landscape, bringing the gallery closer to home—or rather, into the home. Sister in Bushwick was founded by artist-curators Jenny Lee and Zuriel Waters in 2015. It is a micro-exhibition space, only 30 inches wide, situated in the front window of their apartment. When Sister has an opening, viewers wander through the apartment to socialize, but to see the art, they must go outside and look into the front window. This window setup allows the founders to show work 24/7 without any real intrusion upon their daily lives. Eddysroom, also somewhere in Brooklyn—its   address is not even listed online—is semi-private. It is accessible by appointment only, and news of opening receptions is communicated directly from the gallerist, Mr. Eddy, to prospective attendees with a request to refrain from passing the address and phone number to others. Founded by three artists, 106 Green inhabits the living room of 104 (no, not 106) Green Avenue in Greenpoint, Brooklyn and is open only on Sundays.  Artist Michael Fleming founded MOUNTAIN in 2016 and runs it out of his Bushwick apartment at 284 Siegel Street. He opens his doors for events, receptions, and by appointment. Most of these home-based artist-run galleries are not money-making ventures. Rather than profit, the goal is to interact with other artists and to foster community. It is to provide artists who have little intention of entering the mainstream with a place to show their work and generate discourse around it.

Though a seemingly straightforward response to the unaffordable commercial space, the in-home gallery comes with its own legal implications. New York City’s Zoning Resolution regulates the in-home business, or what it calls a “home occupation”. According to the by-laws, a home-based business can occupy up to 25% of the home’s space and may only sell goods produced on site. Certain types of enterprises are prohibited, though a gallery is not one of them. The problem, then, is that for most galleries, the works they sell are not created on site. As well, some galleries open up their entire home for exhibitions, showing pieces all throughout the space, not in just 25% of it. The semi-private nature of many in-home galleries makes them unlikely to attract special attention from neighbors, but there is the possibility that a complaint could throw a wrench into the operation. The Official Website of the City of New York has a complaint portal that links directly to a submission form specifically for illegal use of a residence as a business. With this in mind, the reasons to keep in-home galleries more clandestine may extend beyond simply maintaining domestic privacy.

In the midst of all this, a gallerist must consider where his or her legal responsibilities lie. With new roles come new responsibilities. In September 2016, Richard Lehun of Stropheus Art Law, speaking on the same panel as Josh Baer,  offered an overview of the hybrid gallerist’s legal obligations. A gallerist’s primary responsibility is to the artist. When gallerists free themselves from their physical space, though they may assume the role of an art advisor or dealer in the process, their responsibility to their artists remains intact. An art advisor must be loyal exclusively to the buyer, whereas an art dealer in the secondary market owes their loyalty to the seller. When a gallerist becomes all three, they could potentially face a conflict of interest that may be irresolvable.

        When a gallerist forms a relationship with an artist, he or she has special fiduciary duties to the artist. These include managing the consigned artworks, the funds held in trust, and the funds derived from the representation relationship. Where a gallerist also acts as an art advisor, which is generally the case in the contemporary art market, his or her duties multiply, and so does potential liability. Mr. Lehun details these areas of potential liability in his presentation, which can be viewed here.

 

Conclusion:

Perhaps, through it all, the shifting scene is what is best for artists. It has compelled gallerists and artist-curators alike to invent new spaces, folding the white cube of the traditional gallery and providing artists with more opportunity for curatorial experimentation. For some small and midsize gallerists, the harsh economic climate signaled their end, while for others, it harnessed their entrepreneurial spirit, driving them into unknown territory. Michele Robecchi, an editor at Phaidon, offers his take on the situation, “If you let your business be ruled by apocalyptic predictions, you’re inevitably doomed to fail.” Financial relief may come in the form of legislative change, though it is unclear when that might occur. Despite all the challenges it has faced, it seems unlikely that the brick-and-mortar gallery is going to become completely extinct anytime soon. Ultimately, these new models act to counterbalance an increasingly commercial and homogeneous art market, reserving wall space for a diverse community of emerging artists. Gallerists have found several workable models to maintain the gallery’s physical presence, and they will continue to find more to survive the times.

 

Works Cited:

About the Author: Alexandra Terrell, the May 2017 Center for Art Law intern, is a rising second-year J.D. Candidate at the Schulich School of Law at Dalhousie University in Halifax, Nova Scotia. With a B.A. in Visual Art from Yale University, she plans to pursue a legal career within the art world. She can be reached at alexandra.terrell@dal.ca.

 

It Takes Two to Tango: The Importance of Artist-Gallery Contracts

By Scotti Hill*

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Creative Commons.

Of course galleries are venues of intellectual engagement and social activity, but it can be easy to forget that they also act as hubs for commercial exchange. The same mechanisms that govern relationships between blue-chip artists and mega-galleries ought to be in place to protect emerging artists and pop-up galleries as well. Beneath the veneer of originality and artistic merit lie monetarily-driven representation agreements and consignment contracts. The status quo is driven by mutual interest: galleries need artists to create their inventory so their clients have something to buy, and artists need galleries for their infrastructure and access to art buyers. By creating a roadmap that enables both parties to navigate their working relationships, contracts are at once practical and imperative. So, given the importance of a well-drafted and carefully negotiated contract in almost all areas of commerce, why do artists and galleries often fail to formalize the nature of their relationships in contractual form?

On July 19, 2016, Center for Art Law hosted an art law mixer entitled “Good Fences Make Good Contracts” to explore the question of contracts between artists and galleries. As a follow up, this article examines the intricacies of standard representation and consignment agreements, while also delving into the legal basis for such contracts–namely the Uniform Commercial Code Sect. 9-102 and the New York Arts and Cultural Affairs Law §12.01, Artist and Merchant Relationships. To illustrate benefits of having carefully crafted contracts between artists and galleries, some high-profile relationships, such as the representation and the rumored split between Richard Prince and the Gagosian Gallery highlight select  issues that may arise in an artist-gallery relationship.

Introduction to the Standard Artist-Gallery Contract

Screen Shot 2016-08-15 at 1.04.59 PMWhen entering into a commercial relationship, an artist or gallery may choose to draft a standard representation agreement whereby the gallery agrees to work as an agent on the artist’s behalf. The scope of this agency is negotiated by the parties, as some galleries hope to serve as an artist’s exclusive agent in a geographic area (New York City, for example), while others agree to serve as agent for one specific medium or collection the artist produces. Such agreements set provisions for matters like how revenue is shared after a sale, whether the gallery receives commissions on work sold from the artist’s studio, and the duration and scope of consignment. The following items are also commonly included in artist-gallery contracts:

  • Duration of contract including renewal and termination clauses;
  • Commission structure, terms of payment and other accounting procedures;
  • Transportation procedures;
  • Gallery promotion, marketing and copyright;
  • Coverage and provisions of insurance policies.

After establishing representation with a gallery, artists then consign their artwork to them for safekeeping with the expectation the gallery will sell their inventory. By definition, consignment is the act of assigning the property of one party (consigner, be it an artist or a collector) to that of another (consignee, here a gallery), for sale under contract. As part of the larger representation contract, a consignment agreement should list all the works given to a gallery by the consignor, with an authority to sell a specified group of the artist’s work and providing an indexical record of works in the gallery’s possession.

Uniform Commercial Code (UCC) Sect. 9-102, and New York Arts and Cultural Affair Law §12.01, Artist and Merchant Relationships

While the Uniform Commercial Code is the overarching body of laws concerning the sale of goods and commercial transactions federally, each state has adopted its own commercial code. UCC Section 9-102 sets guidelines for parties engaging in commerce regardless of the existence of a written contract. As it relates to the consignment relationship between artist and gallery, the UCC dictates important provisions that have been upheld over time by case law, namely the criteria and value of goods classified under ‘consignment’ and consignor’s rights in the event of bankruptcy. See Jacobs v. Kraken Inv. Ltd., (In re Salander-O’Reilly Galleries, LLC), 506 B.R. 600 (Bankr. S.D.N.Y. 2014)

In addition to the UCC, thirty-one states have adopted statutes to address the specific circumstances governing art transactions. In New York, for example, the New York Arts and Cultural Affairs Law (NYACAL), Article 12, provides a governing structure for interpreting contracts between artists and galleries. On November 6, 2012, New York’s consignment law was updated to include additional protections for artists by imposing stricter measures on galleries and dealers as consignors. The updated NYACAL addresses three fundamental weaknesses in earlier consignment law: requiring dealers and galleries to place sale funds in a protected trust, awarding attorneys fees for successful petitioners and requiring that critical sections of the consignment agreement be memorialized in writing. The 2012 amendment directly addresses the UCC’s problematic rendering of consigned artwork eligible for seizure by creditors, which is perhaps one of the UCC’s most controversial points.

Before the 2012 revision to the law, creditors could legally seize artworks in a consigner’s possession in order to fulfill unpaid debts. Although galleries do not own artworks on consignment, the creditor exists as a third party outside of, and therefore not bound by, the terms of a contract forged between the artist and gallery. The lack of solid legal remedies for consignors is what has propelled many states to revise their laws to deal specifically with the consignment of art, while in New York, the mammoth Salander-O’Reilly Galleries lawsuit became a catalyst for the amendment.

As such, an important provision exists in many amended state laws: that the gallery be rendered trustees to the artist’s property, which necessitates they hold revenue from the sale of an artwork in a special trust–apart from other gallery funds–that will be paid in full to the artist at an agreed upon time. This amendment works to 1) prevent creditors from seizing consigned art because the value of such works is protected in a trust, and 2) protect trust funds from being improperly used by the galleries to fulfill other financial obligations.

Indeed both parties may take advantage of vague contractual terms or actively work against the creation of a contract. Amended laws aim to prevent this by adding specific fiduciary responsibilities for both parties. Ultimately, if the artist-gallery partnership exists in a state without a comprehensive consignment statute, the parties can, and should, provide through contract the provisions missing from state law.

Richard Prince and Gagosian Gallery Split

After more than a decade and a string of highly successful exhibitions together, news broke in June 2016 that Richard Prince and Gagosian Gallery were going their separate ways. Neither the  veracity of the news nor the details of the alleged split are known, but if true may be explained by the mounting costs from legal battles involving the pair in recent years, which implicate and name Larry Gagosian and his gallery as a contributory infringer.  See Graham v. Richard Prince, Gagosian Gallery, Inc., and Lawrence Gagosian, Cariou v. Prince, Gagosian Gallery, Inc. and Lawrence Gagosian, and Dennis Morris v. Richard Prince, Gagosian Gallery, Inc. and Does 1 through 10 inclusive.

As part of his famous appropriation work, Prince takes the copyright-protected work of other creators and repurposes it in new contexts. While critics and collectors have repeatedly lauded this process, photographers whose work has been used without permission have taken a different approach. From 2014-2016, three copyright infringement lawsuits were filed against Prince by photographers Patrick Cariou, Donald Graham and Dennis Morris. In Cariou v. Prince, 714 F.3d 694 (2nd Cir. 2013), the Second Circuit Court of Appeals held that Prince did not infringe the copyright of 25 of the 30 images he appropriated from Patrick Cariou’s collection of photographs under the fair use exception of copyright law. For his use of the remaining five images in the collection, Prince settled out of court. The infringement cases brought by Graham and Morris are ongoing.

As agents working on the artist’s behalf, galleries accompany artists through creative peaks and declines. While much is made about how important contracts are for artists, galleries are wise to incorporate a termination clause in the contract in order to guard themselves from potential problems that may arise in the course of the relationship. A well-drafted termination clause, for example, is helpful in providing a protocol for the  manner in which the parties can terminate their professional relationship; a termination clause affords the party on the receiving end of the “breakup” adequate time to prepare for the transition. This is particularly important in instances where the gallery has crafted an exhibition or otherwise made plans with specific artworks. A typical clause of this kind would require the party initiating the split to give notice of anywhere from one to three months to the other party.

We do not know if Prince had a contract with Gagosian, but at the very least, it is likely the two agreed upon such critical provisions as payment and consignment of inventory. Despite news of the split earlier this summer, Prince is still featured on Gagosian’s website, which may indicate the two have yet to part ways. And even then, the separation may only be temporary.  After all, artist Damien Hirst reunited with the Gagosian Gallery for 2016’s Frieze New York following a three year split.

Conclusion

Although many states have amended their consignment laws, still other states have yet to follow suit. In areas of the nation where art represents a decidedly small segment of the larger economy, less incentive exists to add in the necessary protections that have been greatly appreciated in large art markets. On a practical level, however, artists can protect themselves by being vocal about their desire for a consignment contract. Contracts create a roadmap for the artist-gallery relationship and can offer clarity  if/when any unforeseen grey areas arise in the course of doing business together. When entering into a business relationship with a gallery, artists are wise to seek out feedback from their peers about the gallery’s reputation and its willingness to negotiate mutually beneficial terms at the outset. Various resources exist online, most important of which are copies of the standard representation and consignment agreements that can serve as a starting point for both parties. Ultimately, if an artist is faced with unique circumstances relating to their practice or needs, they may wish to seek legal representation before, and oftentimes during, their formal acceptance of a gallery’s offer of representation.

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Photo by Luis Nieto Dickens | @vla_newyork

On July 19, 2016, Center for Art Law (the “Center”) hosted “Good Fences Make Good Neighbors,” a Summer Art Law Mixer made possible with support from the New York Volunteer Lawyers for the Arts. The event focused on contracts between artists and galleries and how attorneys negotiate on behalf of their clients. Moderated by the Founding Director of the Center, Irina Tarsis, the panel featured three speakers, all attorneys specializing in art law. Dean Nicyper, a litigator with Withers Worldwide, and involved with revising the NYACAL law, provided a general overview of the legal considerations of artist-gallery contracts, Amelia Brankov of Frankfurt Kurnit Klein & Selz, spoke about the ways in which artists can advocate on their own behalf in forging contracts with galleries and Katherine Wilson-Milne of Schindler Cohen & Hochman, commented on what considerations galleries have when drafting contracts with artists. Attendees, including practicing attorneys, students and artists, asked questions ranging from the appropriate etiquette of negotiating such contracts to how to best situate oneself to prevent and later reconcile potential legal issues that arise from this union. One main take-away from the evening was that that clear terms of a consignment agreement between artists and dealers make for good symbiotic relations between the two key players in the art market.

Select Sources:

About the author: Scotti Hill is a J.D. Candidate, 2018 from the S.J. Quinney College of Law at the University of Utah. She serves as a summer 2016 legal intern for the Center for Art Law, and works as an art critic and curator. Prior to law school, she received a Master’s Degree in art history and visual studies. She can be reached at scottiaustinhill@gmail.com

Disclaimer: This article is intended as general information, not legal advice, and is no substitute for seeking representation.

Summertime and the Art Buyin’ is Easy: Asking Questions about Art Transactions

 

Screen shot 2015-08-06 at 11.49.43 AMBy Daniel S. Kokhba, Esq.*

In the art market, a work of art is often carefully scrutinized and questioned by collectors and their agents concerning its style and substance. The art sale, however, may receive far less careful review. Given the prevalence of fraud, conflict of interest and lack of transparency in such transactions, one should adopt the habit of asking hard and direct questions before committing to a deal – particularly concerning price and associated fees.

While a buyer often intuitively knows to ask for the price of a work of art or service, the basis for the asking price, and a discount, the inquiry should not end there.

In the event that the  price of a work  is especially low relative to market, a buyer should ask the seller why. In some cases it may well be that the market commands a reduced price (e.g., unsold inventory, comparable sales). On the other hand, a buyer should be aware that  bargain basement prices often serve as red flags for lack of authority (or title) to sell, the possibility of  forgery or other fraud.  See Davis v. Carroll, 937 F.Supp.2d 390 (S.D.N.Y. 2013).

Screen shot 2015-08-06 at 11.52.19 AMA buyer should also consider and ask (i) who, aside from seller, stands to gain financially in connection with a sale and (ii) whether the sale price is being split with anyone else. The identity and financial interests of undisclosed third parties will help a buyer better understand all of the parties involved in the transaction . Fee splitting and/or sharing arrangements commonly inflate the price of a work of art.

A buyer should also ask about any costs closely or peripherally associated with the transaction.  Novice and sophisticated collectors alike often overlook and fail to consider storage, insurance, shipping, framing, appraisal, and other associated expenses. If the buyer intends to resell the work, brokerage fees and income tax may be added to the list of expenses. Such expenses will invariably add to the total cost of the transaction and accordingly are considerations that a buyer should be cognizant of in order to get a fuller picture of the transaction.

Awareness of these possible costs will lead to asking questions that will shed more light on, inter alia, the inner workings of the transaction, which are often not advertised at the time of sale. The answers will typically invite further inquiries, providing the buyer with pertinent information.. It happens far too often that referral fees, multiple party fees, and other foreseeable and associated costs and expenses are disclosed only after the deal has been made.  Dodging a shady deal rather than trying to get out of one after the fact  will avoid the possibility of dispute, litigation and further expenses.Taking on an assertive role as a buyer and conducting the appropriate level of independent research should be the approach taken in any transaction involving artwork.

*About the Author: Daniel S. Kokhba, Esq. is a Partner at Kantor, Davidoff, Mandelker, Twomey, Gallanty & Kesten P.C. and focuses his practice in the areas of art law and business law.  He may be reached at Kokhba@kantordavidoff.com or 212-682-8383

Disclaimer:This article is intended as general information, not legal advice, and is no substitute for seeking representation.

Federal Judge Issues Restraining Order To Delay Destruction of Public Art at JFK Airport

Yesterday, U.S. District Judge Robert W. Sweet issued a restraining order against the Terminal 1 Group Association, temporarily halting their plan to destroy artist Alice Aycock’s sculptural public work “Star Sifter” to make way for a new food stands at JFK Airport. Installed in 1998, Aycock’s “Star Sifter” has been a fixture at JFK for over ten years. When the Terminal 1 Group Association told the artist and School of Visual Arts professor that they would be destroying her statue, she immediately sued, claiming that the removal of her work constituted breach of contract.

The original commission stated that “Star Shifter” would not be removed unless is it was “required or necessary to do so.” Aycock’s attorneys stated that these circumstances certainly do not qualify. Further, the piece also performs a safety function, serving as a net between the mezzanine from the departure area beyond the security checkpoint.

Aycock is a respected and well-established member of the national artistic community. She has created thirty-two public works, including pieces at other airports and suspended sculptures for the Sacramento Convention Center in California and the Rowland State Government Center in Waterbury, Connecticut. Additionally, MoMA, the Whitney, and the Brooklyn Museum all have Aycock’s works in their collections.

About the situation, Aycock commented that other airports that display her work have consulted her when they want to change the space, informing her in advance and working to preserve and reinstall the work. Distinguishing the behavior of these airports from that of JFK, Aycock told the New York Times, “They prioritize the work of art.”

The hearing to decide on a final injunction against destroying Aycock’s work will take place on Friday.

Read the full New York Times Article: At Kennedy Airport, an Artist Fights to Save Her Sculpture