Galleries who fail to pay their artists on time, if at all, could become a thing of the past. This summer Peter Hort, a lawyer and member of one of New York’s most prominent collecting families, began a pilot project for a new business that could revolutionise the way art is sold in the city.
The business, called RISBE (after Hort’s children), provides a new model for art sales. In it, the money from a sale goes through a third party, RISBE, which holds it in escrow before releasing a share to both parties—the gallery and the artist or consignor—once the cheque clears. RISBE takes a maximum of 2% from each transaction.
For primary market sales, RISBE brings galleries more in line with the letter of the New York Arts and Cultural Affairs Law that governs such transactions, specifically Article 12, which states that “any proceeds from the sale of such [primary market] work are trust funds in the hands of the consignee for the benefit of the consignor”.
“Most galleries don’t do it, but most galleries haven’t even heard of this law,” Hort says, likening it to a similarly unenforced New York law that requires galleries to post prices for work. “There’s a lot of things that, because of tradition, galleries just don’t do and this is one of them.”
“Don’t have to cross their fingers” To be clear: galleries are under no legal obligation to use a service like RISBE. “Article 12 doesn’t require the dealer to do anything,” says Donn Zaretsky, an art lawyer. “Rather, it sets up a kind of legal fiction that proceeds from sales—in whatever account they happen to sit in, or even if they’re under the dealer’s mattress—are [automatically] so-called trust funds”. This means that there is no risk of a creditor coming after that artist’s income (usually half the proceeds of a sale) if a gallery goes bankrupt. Legally speaking, artists’ money never belongs to a gallery.
With RISBE, however, artists “get it immediately and they get it in full”, Hort says. “They don’t have to cross their fingers and hope.”
There are almost no cases of an artist suing a gallery for non-payment but Hort points out that lawsuits are not worth it for sums up to $15,000 because of the associated legal fees. He wants to simplify everything, he says, because even in the best circumstances the process of getting paid is often awkward.
“I’m sure you know many artists, successful artists that have to come into the gallery, hat in hand, to ask for their ‘weekly allowance’ from their parents,” he says. “It’s humiliating; these people are professionals.”
There are few statistics on the payment of artists but such anecdotes are widespread and dealer margins are always thin. In 2014, the market researcher Magnus Resch sent a survey to 8,000 galleries; 55% of respondents reported a revenue of less than $200,000 per year. Forced with paying an artist or the gallery’s rent, it is easy to see what many dealers would choose.
Early adopter One early adopter of RISBE is Quang Bao, who used to work for the Horts and opened a gallery called 1969 on the Lower East Side in September, says he signed up to the scheme because it takes questions of payment out of his hands.
“What I liken it to is getting a pay cheque with the savings and the healthcare costs all subtracted out of it already,” Bao says of using RISBE, which he already uses with three collectors. “It’s a mechanism that you don’t have to worry about.”
Most galleries are not so altruistic, but Bao points out that from a practical perspective most collectors are put off by galleries that are rumoured not to pay artists.
For resales, RISBE is attractive to collectors, too. Hort recounts a story in which a collector visited another’s home to discover that they had purchased a piece that the other had recently consigned, only for more money than the seller had asked, with the gallery pocketing the difference.
Although Hort still has to persuade galleries to sign up to the scheme, he has big plans for the business, among them a system to facilitate tax-free, like-for-like exchanges of art, micro-lending for galleries and philanthropic public art funding.