THE CALIFORNIA RESALE ROYALTIES ACT

IVAN HOFFMAN, B.A., J.D.


NOTE: The United States District Court in Los Angeles declared the entirety of this statute unconstitutional on the grounds that it violated the Commerce Clause of the United States Constitution.  The case is currently on appeal.

        California has a statute, Civil Code section 986, that provides the creator of “fine art” the right to receive a royalty upon the resale of his or her creations.  The purpose of the law is to provide to fine artists, as defined, the right to participate in the escalation in value of their art.  The statute reads, in part, as follows:

(a) Whenever a work of fine art is sold and the seller resides in California or the sale takes place in California, the seller or the seller’s agent shall pay to the artist of such work of fine art or to such artist’s agent 5 percent of the amount of such sale.
        The statute goes on to provide that an artist can waive the said right to receive this royalty but only in the form of a contract in writing that provides that the artist is to receive more than the said 5%.   In other words, the waiver is only effective if, in this aspect, the agreement is more favorable to the artist.  If the artist assigns his or her right to receive any monies, such assignment does not operate as a waiver of any rights to the same.

Enforcement Mechanisms

        It is up to the seller, if the seller be an individual, auction house or gallery, dealer, broker, museum or any other party acting as an agent for the seller, to withhold the indicated 5% and to locate and in turn pay the artist.  In the event the artist cannot be located within 90 days, the 5% is payable to the state Arts Council.  In the event the seller fails to make such payments, the artist may sue to collect the same within a defined statute of limitation period and the prevailing party in such an action can collect its reasonable attorneys fees.  An artist has seven years to file a claim for monies paid to the Arts Council.  However, there is no central registry of all such sales and it is the personal responsibility of the artist and the artist’s agent to keep track of the art work and the sales thereof.

        The statute further protects the artist by providing that the monies being held by a seller or any of the above parties is exempt from enforcement by creditors of the seller or agent.

        As to any artist who dies after January 1, 1983, the rights provided to the artist pass to the artist’s estate and the rights continue for a term of 20 years after the death of the artist.

Some Limitations

        Among the limitations is that the statute does not apply to any resales (including any sales made as part of any exchange of other property) where the gross resale price is less than $1,000.00 or where the resale is at a price less than the purchaser had paid for the art.

        Further, the statute does not apply to any resales after the death of the artist except as discussed above.

        Further as well, it does not apply in the instances where the resale by an art dealer, defined in the statute as a person engaged in the business of selling works of fine art and who holds a valid sales tax permit, is to a purchaser within 10 years after the initial sale provided that all intervening sales and resales are between art dealers, as opposed to an ultimate consumer.

        Additionally, it does not apply to stained glass artwork if the stained glass was part of and attached to real estate and is sold as part of that real estate.  However, there is no similar exemption for works of fine art otherwise contained in real estate and thus if a work of fine art is part of a real estate transaction, it would appear that the artist’s royalties would apply on the resale of that real estate.  This is significant since if there is a piece of fine art such as a sculpture (not stained glass) erected on real estate and the real estate is sold, that qualifies as a sale of the fine art and the 5% is due to the artist if it otherwise qualifies under the statute.  A determination would have to be made as to how to apportion the value of the fine art separate from the real estate.  So it is not just the resale of fine art standing alone that helps the artist.

        The statute only applies to works of “fine art,” defined as an “original painting, sculpture, or drawing, or an original work of art in glass” created both before and after January 1, 1977.   It also applies only to artists who, at the time of resale, were either citizens of the United States or who resided in California for a minimum of 2 years.  It also is limited to the artist who actually created the work.

Conclusion

        As with The Visual Artists Rights Act, the rights granted by this statute are in keeping with values protected in Europe.  As with VARA, this statute is premised not only on the protection of the artistic, creative elements of society but recognizes the commercial value of art as an element of that society.

Copyright © 2002 Ivan Hoffman.  All Rights Reserved.

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This article is not legal advice and is not intended as legal advice.  This article is intended to provide only general, non-specific legal information.  This article is not intended to cover all the issues related to the topic discussed.  The specific facts that apply to your matter may make the outcome different than would be anticipated by you.  This article is based on United States law.  You should consult with an attorney familiar with the issues and the laws of your country.  This article does not create any attorney client relationship and is not a solicitation.

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