Due diligence in the purchase of a work of art

The value of a work, often significant, imposes on collectors and investors a prudent approach. The purchase must be always seen from the perspective of a future sale. Certain origin, uncontested ownership, and undisputed authenticity are reflected in the value of the work of art and thus in its marketability. Due diligence consists of the procedures to verify the provenance of the work of art, its actual ownership, and authenticity in terms of originality and correct attribution.

For provenance verification, the analysis is documentary. The documentation that must accompany the work of art at the time of its sale may include that relating to the export/ import from the country in which it was made, or any publication in which it was mentioned or represented.

Auction catalogues in which the work has featured, monographs devoted to the artist, certificates issued by the archive that maintain the cataloguing of artworks, or articles in specialised publications in which the work is cited or represented may serve this function.

Even for ascertaining ownership, the verification is documentary. The object is to verify the legal entitlement to sell the work of art because an individual/legal entity has the ownership of it. Original purchase contracts or correspondence that has taken place with the previous seller or art dealer may be useful in ascertaining ownership.

Verification of authenticity is the most complex issue to address. Italian law requires that the sale of a work of art must be accompanied by a certificate of authenticity or probable attribution/ provenance. This document contains the characteristics of the work, the image or photograph that represents it, and the author whose signature accompanies it. Regrettably, since a certificate of authenticity is not mandatory between individuals, in such cases it is advisable to have an appraisal by an expert.

With regard to tax profiles, appraisal consists of verifying purchase invoices, named payment receipts and tracked payments, and the correct application of direct and indirect tax rules. These are key elements to ensure the correctness of the transaction and the legitimacy of ownership of the work of art. In some cases, it is advisable to check with the Carabinieri's database for the protection of cultural heritage or Interpol's database to verify that the work of art is not stolen or subject to court actions. In conclusion, what is needed for a successful purchase? Certainly, multiple skills and considerations which often, if the transaction is international, require professionals from more than one jurisdiction to perform legal and tax due diligence. In fact, the legal framework to refer to is complex and includes national regulations, international conventions, European Union regulations and directives, as well as national and international codes of ethics.