Resale Right for Visual Artists Act 2023

The purpose of the scheme is to allow artists to receive a royalty on sales of original visual artworks in the secondary market.

Put simply the issue is this: especially for early career artists they may sell visual artistic works for a low value (original sale) but as their reputations increase over time the subsequent sales of the same works (secondary market) can be at much higher prices. The artist receives no return on the secondary sale and remains starving in their metaphorical garret. The Act is designed to give the artist at least some measure of future return on secondary resales.

The Act applies to original visual artworks. They are very widely defined to include not only traditional works such as drawings or paintings but multimedia art including art created using computers and electronic devices (the impact of AI on artistic authorship being a separate and vexed question).

Key Points

• If the original visual artwork is resold as a professional or voluntary resale and the price is $2,000 or more (as specified in the Regulations) then the sale is a qualifying resale.
• A professional resale is a sale involving a gallery (defined more widely as an art market professional) or an institution, in each case with a New Zealand connection.
• A voluntary resale is where the parties agree that the Act will apply (where it otherwise would not do so).
• In the case of a professional resale the resale royalty payable is 5% of the resale value.
• In the case of a voluntary sale the resale royalty is whatever the parties have agreed to.
• The contract of sale in either case must be entered into within the relevant copyright period, currently 50 years from the date of death of the artist.

Who pays the royalty?

The answer is the seller and the buyer (including their agents), and this liability cannot be contracted out of (for example by the artist giving a waiver).

Who receives the royalty?

In the first instance a collection agency so that the seller and buyer’s royalty obligation ceases when payment is made to the collection agency. The collection agency then makes a payment to the resale right holder (the artist if they are still alive or whoever holds their right if they are dead, for example, a beneficiary under their will or a trust).

The $2,000 threshold is likely more than the original sale but still quite a high secondary market price for an emerging artist.

This raises an immediate question on the real effectiveness of the scheme for artists other than those with reputations recognised by the upper end of the secondary art market.

Support for that comment is in the regulatory impact statement for the Act which noted that for the 2018 -2020 period the median artist royalty would have been only $182.

However, for visual art rockstars and especially their estates the payout could be much more significant, i.e. on a $500,000 sale a payment to the collection agency by the seller and the buyer of $25,000 which is better than nothing.

The payment will be income to the recipient on which tax is payable, an obligation as to which artists could be usefully reminded.

If the royalty is declined it goes into a cultural fund for redistribution to artists generally. The collection agency will be a not for profit agency funded from royalty payment fees.

The scheme was driven by free trade agreements with the EU and the UK. While focussed on New Zealand it is intended to provide for a reciprocal network between the 3 political groupings. Reciprocity can be extended by Order in Council to other countries.

The Act has more detail than can be summarised here including provisions relating to joint authorship, to the inalienability of the right (for example any charge over the right is void), to provisions relating to who holds the resale right after the artist dies, and to the obligation to inform the collection agency about secondary market resales.

The Act will be enforceable by the collection agency in the courts and separately by the resale right holder or anyone else.

The Copyright Licensing New Zealand has been appointed as the collection agency which will be initially funded by the Government although as royalties arrive the agency is entitled to retain 20% of them to cover costs.

It will be interesting to see how the scheme develops who the real beneficiaries might be and how the secondary art market commission arrangements may become modified through the impact of the Act.