Risks and side effects: If art is a pledge

Bares against originals: What sounds sensible, has its drawbacks in detail. Especially if not agreed exactly which plants actually secure the loan.

Umsatzeinbr├╝che of more than thirty percent in the major auction houses, seller, must give significant discounts or postpone deliveries indefinitely: the financial crisis continues to cast its shadow on the art market, and a recovery is slow in sight. And so it seems only logical that the already battered banks withdraw from a sector which is often reputed to be somewhat profitable appendage of retail banking. The latest example: the Swiss bank UBS , which had announced earlier this year to close its Art Banking department.

On the other hand, there are currently “Art Loans”, art-based loans so high in demand. Many collectors and artists gain the much-needed liquidity by granting their donors art as collateral. Thus, the photographer Annie Leibovitz recently the copyright to her entire oeuvre to a specialized art finance company passed (see our box). Negative, licenses and other contractual rights which may yet emerge from the images are included.

If murals are used for credit protection

Also, the American artist Julian Schnabel is said to have pledged several works by Picasso, Warhol and Dali for financing a property recently. Finally, venerable institutions like the New York Metropolitan Opera resort to this means: early March transferred the opera two murals that had once attached Marc Chagall in the lobby, to secure a 35-million-dollar loan to the bank. But independent of banks and private lenders can be found on this market: art is just an asset like any other. Artworks, as well as jewelry, real estate, machinery or cars, are given for a loan or other liabilities as collateral if there are also against such a “normal” economic goods some special features.

The lawyer knows basically two ways in which a security can be ordered on moveable property: the pledge and the equitable lien. While the borrower (guarantor) for the security transfer ownership of belonging to him movable property to the lender (secured party) transfers, is contractually ordered a limited real right in the matter to ensure the requirement in the pledge. the creditor now falls with its claim for payment so he can be satisfied by the recovery of the mortgaged or of over suitable object.

Owned lot lien

In their economic function, the collateral assignment corresponds to the lien, however, has gained acceptance in practice against this because the pledge of movable property requires the transfer of goods to the pledgee necessary. In the transfer of ownership, however, it is possible to leave the possession of the thing the guarantor. It is therefore also called “possessory pledge”. This is also in the art world mostly the interests of the parties; because the collector is supposed to continue to be able to exhibit the work in itself or, for example in the museum, the dealer requires a work that it can offer its customers.

What is to be aware of when works of art are intended to secure a loan? First, the parties must specify exactly which plants are used as collateral. What sounds so obvious in practice is not always common: It should be noted that in so-called collective terms, such as “my collection of Asian art,” the objects in question must be distinguishable based on manageable, external criteria.