The Resale Rights for Visual Artists Act 2023 applies to certain secondary sales of visual art works in New Zealand, requiring a portion of the proceeds of qualifying sales from December 2024 onwards to be paid as a royalty to the artist or their estate.  

This is a big change for the New Zealand art market. Traditionally, artists are only paid on the first sale of any particular artwork. They may retain some intellectual property rights associated with the work (such as copyright), which can generate income from licensing etc should the work be reproduced for commercial purposes. But till now, if an artwork is later resold for more than what the original buyer paid for it any increase in the value of the work goes to the seller and art market professionals who facilitate the transaction, and the artist has not had any direct benefit (other than perhaps to their reputation).

The requirement to pay royalties on qualifying sales under the Act however now means that artists have the potential to receive an ongoing income stream from resales of their work, and importantly, for that income stream to grow proportionately to the value of the artist’s work if this increases over the artist’s career. 

The Act is also a big deal for art market professionals and the collectors and institutions who buy and sell artwork through them as under the Act they will now be responsible for ensuring that royalties on qualifying sales are paid.

This article provides an overview of the Act as the first of a number of articles exploring the implications that this legislation will have for the New Zealand art world after this takes effect in December 2024. 

Benefits for Artists

To get an idea of how the Act could benefit artists, consider British artist, David Hockney. His “Portrait of an Artist (Pool with Two Figures)” originally sold in 1972 for $18,000 USD. Six months later it was sold by the original buyer for $50,000.  Had a law equivalent to the New Zealand Resale Rights for Visual Artists Act applied to this sale, Hockney would have received $2,000 on this sale, a significant proportion of the original sale price.

But that was only the start. Further sales of the painting occurred in 1983 and 1995 at undisclosed prices, and then on 15 November 2018 it sold for $90.3 million at auction, setting what was then a new auction record for a living artist. Had the Act applied to this sale, Hockney would have made a cool $3,612,000 USD (on top of whatever he might have earned from the earlier sales). However, no resale right applied to the sale. A CNN article at the time noted:

We can only imagine how Hockney will feel after this sale, when the painting he worked so hard on has sold for more than 5,000 times its original price. The current seller and the auction house will no doubt profit, but, as a Christie’s spokesperson confirmed, “the artist will not be financially benefiting.”

Turning to a home grown example, the highest price realised for the work of a living Kiwi artist to date is $516,000 NZD for Michael Smither’s “Two Rock Pools” in late 2022. Had the Resale Rights for Visual Artists Act applied at the time, Smithers would have received $20,640. However, in an interview with Radio New Zealand Smither confirmed he did not receive any financial benefit from the sale.

And it’s not only artists who benefit from the new law. Although under the Act the artist’s resale right cannot be transferred to anyone while the artist is alive, after their death, their “successor” will take the right (subject to certain conditions). The highest prices realised for a New Zealand artists work to date belongs to late artist Colin McMahon. His work work “Is there anything of which one can say look this is new?”, sold for $2,390,000 in September 2022. Under the Act McMahon’s successors would have received $95,600.

The benefit for emerging artists will not be quite so dramatic, with a $2,000 resale (the lowest to which the Act applies) netting the artist $80 before tax. But this still recognises the value of their work, and may grow overtime with their reputation and value of their works.

Costs, Compliance and Other Headaches

While all this is great for artists and their successors, someone is paying for this royalty, and that someone will be the collectors, art dealers and institutions who buy and sell art on the secondary market. On top of this there is likely to be an increase in compliance costs for art market participants who will be obliged to account for the artist’s commission. Whether this will result in higher prices for purchasers, or reduced profit from sales (or both), is still to be seen. Regardless, these factors could well have a cooling effect on what in the last few years has been a booming secondary art market.

The Act in Summary

The primary function of the Act is to establish a resale royalty scheme for visual art created by New Zealand artists who will earn a royalty of 5% of the sale price each time their artwork is resold in a qualifying sale, less a 20% commission payable to the agency that collects and distributes the payment. The seller, and if the seller has one, their agent, will be jointly responsible for paying the royalty to the collection agency. If the seller doesn’t have an agent, then the Act provides for the buyer’s agent (or in the absence of any agents at all, the buyer themselves), to also be liable. The collection agency must then locate and pay the royalty less commission to the rights holder.

For a sale to qualify under the Act, the artwork must be an “original visual artwork” created by an artist who meets specific eligibility criteria, such as being a New Zealand citizen or resident, or a citizen of a country with reciprocal rights with New Zealand. This may not always be clear cut, and we will explore some of the possible issues that could arise in later articles.

The sale must also meet a minimum price set by regulations, which at the time of writing is $2,000 (excluding things such as a buyer’s premium, commission, and GST). In addition, the transaction must involve at least one “art market professional,” like an auctioneer, art dealer, or publicly funded museum, library or archive, who is in or has a relevant connection to New Zealand, and the sale itself must relate to their dealings with visual artworks in New Zealand. However, participants to a non-qualifying transaction can opt into this scheme voluntarily (and specify the royalty), if they wish.

As noted, the Act provides for a collection agency which will be responsible for collecting and distributing the royalties to the artists. However, although the agency must be a not for profit organisation, it won’t do this for free. Regulations set the collection agency’s fee at 20% of the 5% royalty. This fee structure aligns with international standards and ensures that the agency can effectively manage the scheme.

The agency is appointed by the Minister for Arts, Culture and Heritage. At the time of writing, it has recently been announced that Copyright Licensing New Zealand has been appointed in this role for a period of three years. It has a broad range of responsibilities for administering the scheme created by the Act, including the obvious responsibilities of collecting commissions and distributing these to the rights holders, but also taking enforcement action against those who don’t pay. In addition, the Act allows for the creation of a cultural fund by the collection agency to be used for the purpose of supporting the career sustainability of visual artists using funds generated by the scheme, including any unclaimed or declined royalty payments.

The resale right is inalienable from the artist during their lifetime (and, it should be noted, is independent of copyright in the artwork and applies regardless of whether this is held by the artist or not). But the resale right can be transferred to the artist’s successor after their death. The right subsists for 50 years after the artist’s death (aligning with the duration of copyright protection). A successor can transfer the right and it may be that this will create a market for such rights in due course. The right can be jointly owned (both during the artist’s life if an artwork has multiple contributors, and after their death if the artist has two or more successors), with each individual right held in shares. As between the artists these shares will be equal by default, but they can agree to division of the right on another basis by written agreement if they wish. The existence of the right will also be something that artists will need to consider as part of their testamentary planning.

It is important to note that the Act is designed with a New Zealand cultural lens in mind, and its purpose provisions state that it enables royalties to be managed in a way that acknowledges the role of Māori as tangata whenua and to offer culturally appropriate support to Māori artists. Moreover, it is to also required to take an inclusive approach that recognises the diverse needs of all communities across New Zealand. Regulations reflect this, requiring consultation with Maori over changes to their operations that may impact certain art market participants, and in respect of the use and structure of the cultural fund. In addition the agency has to keep records relating to resale royalties for Maori and Pacifica artists as well as other matters that capture how such artists fare under the Act. The agency has similar obligations with respect to non-Maori art market participants about such matters too, but without specific regard to ethnicity. It should be noted that Maori and Pacifica rights holders must identify themselves to the agency as such.

International reciprocal rights have been mentioned above. New Zealand is not the first country to implement a resale royalty scheme, and the Resale Right for Visual Artists Act has been designed with the intention of integration with similar schemes overseas through a focus on “reciprocal rights”. This means that New Zealand artists could potentially benefit from royalties when their works are resold overseas in countries with similar schemes. Of course, it also means that art market participants will need to be alert to the possibility that sales of works by non-resident artists may give rise to obligations under the Act as well.

Finally, it is important to note that the Act does not have retrospective effect when it comes to contracts for sales entered into before the Act comes into effect in December 2024. But it does provide for artists who died before the Act came into effect by ensuring that their successors will be eligible to receive royalty payments for qualifying sales going forward.

The Act is not however as straightforward as it might seem, and some interesting and potentially unexpected issues are likely to arise in practice. Some of these topics will be explored in more detail in future articles. In the meantime, if  you have any thoughts or questions about how the Act might impact you, feel free to reach out.

The information on this website is general in nature and may not be up to date. It is not intended as legal advice for any specific situation or person and should not be relied on for that purpose. You should always seek up to date legal advice for your specific situation.

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