Renting Art: Borrowers and Lenders Beware

Borrowing and lending art is generally a good thing. The practice can increase and broaden access by spectators who might not otherwise be able to experience directly the creative act. It can also generate income for artists and their estates through a little-known piece of legislation.

Public facing museum and gallery collections borrow and lend artworks to and from each other, and private owners (often the original artists or their estates in the case of modern and contemporary works) make further contributions: most arrangements are non-commercial – rent-free. Recent economic times are tough in the public sector, and drives for income generation by museum and gallery institutions often include lending works on a commercial basis. The private sector has seen a steady increase in commercial lending of works, often arranged via online browsing, selection and payment, plus swiftly couriered dispatch to the borrower: renting.
Typical art rental business models operate on a hire-purchase arrangement, often called ‘closed-end leasing’ or ‘rent to own’. Customers agree to pay for goods by installments and take possession of them, but do not become their owner until they have paid in full. The hire-purchase model was originally developed during the mid-20th century consumer boom, to facilitate the purchase of motor vehicles, white goods, and other higher capital value items beyond the financial reach of most working folk. Similarly, art rental contracts give customers the option to buy on payment of the full purchase price (plus any agreed interest on the outstanding balance). If customers default, suppliers may re-possess the goods; if installments are properly made, customers enjoy what would otherwise be a prohibitively expensive item with the cost being spread over a period of time.

Using the hire-purchase model, art rental businesses are ultimately aimed at developing new collectors, especially mid-to-higher income (but capital poor) younger people inhibited by their lack knowledge and experience of the market for modern and contemporary works; but who are attracted by potential kudos and enjoyment that ‘ownership’ may bring. Art rental is a ‘suck it and see’ deal. Suppliers source what they consider to be market-worthy works, high-definition images of which are posted online with relevant textual information about each work and artist, and its full purchase or rental price.

A hypothetical online art rental business might operate in the following manner: offering works valued up to around £200,000 for hire at £900 per month down to around £20,000 for hire at £250 per month. If customers were to exercise their option to buy, half the rental fees would be credited towards the full purchase price. Works could be sourced from gallery dealers willing to cooperate by making available items from stock that would otherwise remain unseen. In this way hidden works would be exposed to view online, further if rented; and the gallery would share a percentage of rental income with the possibility of works being sold (and receiving a further cut).
This arrangement does not specify whether artists or their estates receive a share of rental income. Should artists or their estates be legally entitled to receive a fair share of income from art rental businesses?  If work is supplied to art rental businesses directly by the artist/estate or through their representing gallery, it is likely that any renting arrangement would be authorized by them in consideration for a share of any rental income. However, if the artist/estate was not the supplier and did not authorize rental of the work, should they still be paid a fair share?

In anticipation of what has been the exponential growth of e-commerce generally over the past 20 years or so, in the mid-to-late1990s leading industrial nations agreed to enact laws to protect the authors of creative works – especially film, music, literature, and also visual art – against unauthorised rental of their works by others ‘for direct or indirect economic or commercial advantage’. In the UK such protection was achieved by amending its copyright law, in fulfillment of its obligations under the EU’s Rental Directive (92/100/EEC) requiring Member States to grant exclusive rental and lending rights to authors including visual artists.

Accordingly, in 1996 the UK inserted a new Section 18A into its Copyright Designs and Patents Act 1988 (CDPA), since when it has been has been largely overlooked – certainly not the subject of litigation over renting visual art. Such neglect is understandable. Section 18A appears on its face to outlaw renting copies of creative works, which was especially important in relation to renting digital copies of films, recorded music, and books; but in the case of visual works there was unlikely to be a significant market for renting copies. This resulted in little if any media coverage of the new law.  However, the last provision of Section 18A is significant for those involved renting or lending not copies but original works: ‘rental or lending of copies of a work include the rental or lending of the original’.

In other words, over and above their basic rights to prevent (or authorise) copying of their original works, artists and their estates (for 70 years after death) are automatically given the further exclusive ‘rental right’ to prevent (or authorise) their original copyright works being rented. Accordingly, just as licences authorising copying and merchandising can generate payment of fees/royalties to artists or their estates, so can licences authorizing rental of their original works. Clearly, lending directly by artists and their estates (or via their authorised agents and dealers) of works they own raises no ‘rental right’ issues. But would lending by other owners of works – public facing museums and galleries, dealers in the secondary market,  auction houses, art rental businesses, private collectors – be violating ‘rental rights’ of living artists or their estates?

The UK’s CDPA defines ‘rental’: ‘making a copy of the work [or the original] available for use, on terms that it will or may be returned, for direct or indirect economic or commercial advantage’.  This prohibits making works available to the public for commercial hire, and would include art rental businesses not acting for or with the permission of modern or contemporary artists or their estates. Public facing establishments are given special exemption from the commercial renting provisions, where a work is made ‘available for the purpose of exhibition in public’; for example, a private collector lending to a public gallery is permitted to receive payment – as is one public establishment lending to another.  All in all, the ‘rental right’ restrictions are not aimed at public facing institutions that pay for borrowing work from other institutions or private collectors, or at those who rent works on a one-off  basis from individuals or organisations that are not art rental businesses. ‘Rental right’ restrictions are specifically aimed at art rental businesses offering works for hire to the general public.

Are art rental businesses aware of the artist’s ‘rental right’; do they secure authorisation for renting from artists or their estates, and pay them a fair share accordingly? Are artists and their estates likewise generally aware, and do they claim their fair share of rental income? Perhaps there is an additional role for the UK’s artists’ rights collecting societies: to embrace the enforcement of ‘rental right’ within their other services collecting royalties for copying and resales.

© Henry Lydiate 2013



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This article is from the Artlaw Archive of Henry Lydiate's columns published in Art Monthly since 1976, and may contain out of date material. The article is for information only, and not for the purpose of providing legal advice. Readers should consult a solicitor for legal advice on specific matters. Artists can get free online legal information from Artquest.