What if I only collect post-war or contemporary art?
The risk of defective legal title impacts all periods of art, not just older or secondary-market fine art. The basis and type of the risk varies across different segments of the art and collectible market, but the existence and severity of title risks does not discriminate against only certain genres of art and collectibles.
With contemporary art, which includes primary-market works sold directly from the artist’s studio, the legal title risk has nothing to do with the risk that the art may have been “stolen” during WWII.
Financial liens and encumbrances often impair clear legal title to contemporary and primary-market fine art. Common scenarios involve a creditor claiming a security interest in the art because the seller used the art to secure financing but did not pay back their debt to the lender; the seller failed to disclose a right-of-first-refusal clause in the bill of sale between the first dealer and the first buyer either intentionally or because the seller did not know that the clause existed; or the seller entrusted the work to a dealer or gallery for sale and the dealer sold the consigned artwork without paying the seller the proceeds.
Collectors should consider the benefits of acquiring title insurance for primary-market works, especially at the point of the initial purchase because not only are the risks relatively lower and hence so are the premiums at that time, but the policy will continue to protect the artwork and pristine chain of title until the collector or their heirs are later ready to sell or gift the work.
Contemporary and primary-market art as well as older or secondary-market art should be treated as an asset with proper risk management best practices.