In recent months, lawsuits were filed in federal District Court by artists who have claimed that royalties have not been paid by the auction houses selling artworks under the Resale Royalty Act. The auction house defendants in response filed a joint motion to dismiss the case, challenging the constitutionality of the law. The District Court granted the defendants’ motion to dismiss, holding that the Act violated the Commerce Clause of the United States Constitution. The artists have filed an appeal in the Ninth Circuit Court of Appeals. Whether or not the Act is constitutional will not be finally resolved until the Ninth Circuit Court of Appeals rules on the artists’ appeal.
The California Arts Council intends on continuing to hold all royalties previously collected to be distributed in accordance with the Ninth Circuit’s decision. For royalties currently held by the Arts Council, please see the list of artists contacted or to be located.
Artists, sellers, galleries and auction houses should seek counsel from their attorneys, if they have legal questions. The Arts Council is unable to offer legal advice or speculate as to the outcome of the appeal.
The California Resale Royalty Act provides that, with a few exceptions, the seller must pay the artist (or a deceased artist's estate or heirs) five percent of that resale price. Certain sales by an art dealer will not generate a resale royalty.
When the seller, gallery or auction house cannot find the artist, the royalty payments are sent to the California Arts Council to distribute to the artists, if it can find them. Monies where the artists cannot be found are used for Art in Public Places.
It is impossible to determine precisely how many royalties have been paid and how many have not because distributions are often made directly from the seller to the artist, bypassing the CAC. Although some sellers, either out of lack of awareness or intransigence, have failed to pay resale royalties which were owed to artists, countless artists have successfully collected resale royalties ranging from $50 to several thousand dollars. Nevertheless, it is clear that compliance will improve as more sellers learn the circumstances under which they must collect and transfer the resale royalty to the artist or the CAC and as more artists understand this law and become willing to assert their rights.
The California Resale Royalty Act (California Civil Code section 986) requires a seller of art in the secondary market to pay a resale royalty to the artist under certain circumstances. This California law is unique in the United States, although it is a well-established legal right in some other countries and is being considered for adoption by many more. The right of artists to share in the appreciated value of their works when resold is important both in principle and in dollars. This flyer is meant to help orient sellers to the law, but is not a substitute for reading the full Code.
For example, in 1981, when Ghiradelli Square in San Francisco was sold, artist Ruth Asawa was paid a $5,000 resale royalty. That sum represented five percent of the appraised value of the fountain she created some years earlier which had been sold along with the rest of Ghiradelli Square. Another interesting case involved Sacramento artist Jack Nielsen. His sculpture was part of an office complex whose owner went bankrupt. When the real estate, including his sculpture, was sold in foreclosure, Nielsen sued claiming that, although the office complex had declined in value, the sculpture he created had appreciated from $30,000 to $125,000 and he was entitled to a resale royalty. He won.
Under California Civil Code Section 986, an artist shall be entitled to a royalty upon the resale of his/her work of art provided that:
- The artist at the time of the sale is a United States citizen or has been a California resident for at least two years.
- The seller resides in California or the sale takes place in California.
- The work is an original painting, drawing, sculpture or original work of art in glass.
- The work is sold by the seller for more money than she or he paid.
- The work is sold for a gross price of more than $1,000 or is exchanged for one or more works of art or for a combination of cash, other property, and one or more works of fine art with a fair market value of more than $1,000.
- The work is sold during the artist's lifetime or within 20 years of the artist's death.
At the same time, however, the Resale Royalty Act does not apply if:
- The sale is the initial sale of the work and the legal title of the work at the time of such initial sale is vested in the artist.
- The resale of fine art is by an art dealer to a purchaser within 10 years after the initial sale by the artist to an art dealer, provided that all intervening sales are between art dealers.
- The sale consists of a work of stained glass artistry permanently attached to real property and it was sold as part of the sale of the real property to which it was attached.
Artists should attempt to maintain current records of the location of their works of art. Of course, this is invaluable when artists wish to assemble their art for the retrospective, but it may also help artists learn of the resale of any of their art.
Please be aware that artists have a legal right to know the name(s) of the buyers of their works, even if the works are or were consigned to a gallery at that initial sale. (See the California Penal Code, Section 536.)
To start this tracking at the initial sale of a work, it is always good to include in the contract between the artist and gallery a phrase such as "The gallery agrees to provide the artist the name and contact information of the purchaser." Artists selling their own work directly may wish to stipulate to the purchasers "If the purchaser subsequently sells the piece, the purchaser agrees to notify the artist." And, of course, provide your full contact information.
When the transfer or sale information is obtained, artists may wish to write the new owners to ask for notification of when, or if, the piece is sold subsequently. When sold, the buyer turned seller may be willing to give the artist the second buyer's contact information, allowing for the tracking process to continue.
To help track sales, the artist may wish to subscribe to auction houses' announcements of sales of their type of work. Many times upcoming sale information is posted on the internet as well.
Artists should periodically Google their names in quotations with the word, "art" or "artist." For example, the Google search would be for: "John Doe" artist. Doing so may help the artist track sales information on gallery or auction websites, which sometimes record sale dates and prices. Artists may then contact the gallery or auction house to verify that a resale royalty check is being sent, if a royalty is triggered under the circumstances of the sale.
In addition, artists should check with the website, FindArtInfo.com . Here artists may use the searchable database to find out about sales of their works. There are some other similar sites as well. Most require subscriptions to access the information needed to follow up with the seller, auction house or gallery.
Artists are encouraged to assert their rights under the California Resale Royalty Act. The information on this page is not to be construed as legal advice. Please consult your attorney for legal advice.