State Law Pays Artists Their Due

Artists and art collectors alike should be interested in a relatively obscure California law that gives artists a percentage of the sometimes skyrocketing value of their original creations.

The law (Section 986 of the California Civil Code) is simple and straightforward, with few loopholes or exceptions: If you resell a work of fine art in California for more than $1,000, you have to find the artist and pay him or her a 5% royalty. This applies whether you own an art gallery or only one piece of art. It also applies to California residents who resell art outside of the state.

If you can’t find the artist within 90 days of the sale, you have to pay the royalty to the California Arts Council.

The statute, which is apparently the only one of its kind in the United States, was enacted in 1976 and is patterned after French legislation known as droit de suite first passed in the early 1920s, according to Stephen W. Kramer, an arts lawyer with the Century City firm of Gold, Marks, Ring & Pepper.

The original idea, explains Kramer, was to give some of the starving artists from the Impressionist school the benefit of the increased value of their paintings. Sold originally for as little as $10, they were fetching $10,000 a decade or two later.

Unlike France, which has an official registry of all works of art, and a central organization collecting and paying the royalties, in California there is no governmental agency empowered to administer the law. It is left to art dealers, collectors, artists, and what Kramer refers to as an “honor system.”

The law has primarily benefited prominent artists, says Kramer, simply because they are more likely to know about the sale of their works: “If a David Hockney oil is going to sell in Los Angeles, there is a pretty good chance that Mr. Hockney will hear about it.”

There are a few interesting legal angles to this legislation. What, is a “work of fine art,” for example? The statute defines it as “an original painting, sculpture, or drawing, or an original work of art in glass.” But what about an original work of art in wood, leather or paper? The only reported appellate decision on the subject involved architectural plans that were held not to be art.

As with any statute, there are always a few exceptions. The royalty obligation doesn’t last forever. The payment is only required on sales that occur for up to 20 years following an artist’s death. And if the work is sold for less than you paid for it, you’re off the hook.

The most interesting exception is for stained glass artistry that has been “permanently attached to real property.” In other words, when you sell your house, you don’t have to pay a royalty to the artist who put in the stained glass window. Imagine trying to allocate how much of the purchase price is based on the value of the window.

The protection applies only to stained glass artistry, but what about other works of art attached to buildings?

Kramer suggests this legal hypothetical: Say that you are building a multimillion-dollar office complex and you commission a sculpture for the lobby. A few years pass and you sell the entire complex for double your original investment. Are you obligated to pay the artist a 5% royalty on the increase in value attributable to the sculpture?

Just to be on the safe side, Kramer’s firm advises its artist and developer clients to negotiate that particular contingency in the original agreement.