On the coattails of the Frieze and TEFAF art fairs, the art world is gearing up for another busy week in New York, during which the major auction houses will hold their yearly May auctions of Impressionist, Modern and Contemporary artworks. Approximately $1.9 billion of art was sold last May,1 and auction property with a similar aggregate value is expected to go "under the hammer" this week. 

As the value and volume of artwork transacted continues to set new records on practically an annual basis, and artwork is increasingly viewed as an asset class for both long-term and shorter-term investment strategies, the art market has witnessed an evolution in the structures employed for auction consignments of high-value works. In the current market, financial deals for consignments often include complexities such as "house" guarantees, "third-party" irrevocable bids2 and advance loans (whether to the consignor3 or irrevocable bidder). From 2016 to 2018, the use of guarantees alone reportedly rose from 39% to 58% of the aggregate annual low auction estimate,4 with a corresponding annual increase in the number of auction lots offered subject to a guarantee.5 

In these sophisticated deals, critical negotiation issues include allocation of "upside" (i.e., profit-sharing) and other commercial rewards (including "financing fees" and/or right of first refusal), as well as pre-sale and post-sale risks on issues such as condition and rescission. Pryor Cashman's Art Law Group has extensive experience—including as former in-house counsel for an international auctioneer—with the negotiation of auction house deals of various magnitudes, and deep understanding of how auction houses allocate risk and reward to the various stakeholders in an auction transaction. The group is accordingly uniquely poised to assist clients in obtaining advantageous financial and legal terms before signing a consignment, irrevocable bid or advance loan agreement. 

For the Spring 2019 sales alone, Pryor Cashman's Art Law Group has helped its clients consign, guarantee and/or finance auction property with an aggregate low estimate exceeding $150,000,000. 

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1 See Artnet News, 12 Crucial Takeaways From Last Week's $1.9 Billion New York Auction Cycle.

2 See Financial Times, Are guarantees the 'invisible hand' of the art market?.

3 See MarketWatch, Art auction houses are offering a new perk to 'cash poor clients'.

4 See ArtTactic, Auction Guarantee Report – April 2019 (Executive Summary).

5 See π–ex, Guarantees and Irrevocable Bids: The Fine Art Market's Magic Tools?.

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