_All passions spent – a guide to investing in luxury assets

By Shane Gleghorn

Partner, taylor Wessing Private Wealth Team 

Provenance and attribution are vital when buying a classic car, a work of art or an antiquity. A connection with a wellknown historic collection, authorship by a renowned artist, or a CV that includes setting the lap record at Le Mans, for example, can enhance desirability – and add significant value. 

Of course, the reverse is also true:and in those cases where provenance or attribution turn out to be incorrect, the consequences of having purchased a mistakenly or falsely described asset can be very significant indeed.

When, for example, one of our clients discovered that the artworks they had bought based on the understanding that they were by a highly regarded artist whose works were to be found in a European Royal collection were actually by a minor artist of no significance, the impact was huge both emotionally and, of course, financially. 

Buyer beware 

Navigating between fact and sales hyperbole to work out where the truth actually lies can be challenging, particularly as even pre-eminent experts can have differing opinions. Take the version of Caravaggio’s The Cardsharps sold at auction for £42,000 after being catalogued by Sotheby’s as the work of a follower of the artist. The buyer, a renowned art scholar, later declared that the painting was by Caravaggio himself, and valued it at £10m.

The prior owner then tried to sue Sotheby’s for allegedly giving him negligent advice about the painting’s value. However, the court held that the auction house had, at the time of the original sale, reasonably come to the view that the painting did not have Caravaggio “potential”. 

^{Caravaggio’s The Cardsharps}

It is also a case of “buyer beware” in the classic car market. When paying a premium for provenance, corroboration is key to preserving and enhancing the future value of the car – as is clear documentation to support that provenance.

Paying for the time and expertise of a marque specialist, or an expert from the manufacturer, is a wise upfront investment.

Having been involved in defending a claim of misrepresentation in relation to the sales particulars of a rare Lamborghini Miura, we are all too aware of the arguments which can arise. 

Legal title 

Legal title is an aspect that is often overlooked. Is the person selling you those “pristine matching numbers” or that “magnificent example of an Old Master’s oeuvre” really the legal owner?

Do they really have the right to complete the sale? And how can you be sure? With no centralised register to show who owns what, it is not surprising that ownership disputes should arise. Buying from a well-regarded source can offer some protection; but not always. 

One example we encountered involved a client who became the victim of a calculated fraud, where a genuine artwork was swapped with a forgery. The fraudster consigned the original for sale by auction, leaving the client unaware that the artwork hanging on their wall was a fake.

Such a scenario shows how a number of people – the legal owner, the auction house and the buyer – can all find themselves victims of fraud. 

Buyers of classic cars should ask for documentation such as bills of sale, legal certificates or records held by the original manufacturer. They should also ensure there is no outstanding finance that might lead to a competing claim for ownership. Similarly, those purchasing yachts should check for existing liens: rights over the asset in favour of a creditor. If the creditor retains the lien post-purchase, the yacht could be detained or sold. 

Insurance 

One final word of caution. Whether you are a buyer or a seller, be certain to have insurance that runs either right up to the point of sale, or from the very moment ownership is transferred.

Should your classic car happen to burst into flames just as it is being shown to a potential buyer, as happened to one unfortunate Bentley owner, the situation will be made slightly less heart-breaking by the knowledge that your investment has not entirely gone up in smoke. 

Specialist insurers can provide bespoke arrangements, including those where a range of assets is covered under one policy. They can also make sure you’re covered if, for example, you decide to take your Bizzarrini GT Strada for a spin on the track at the Goodwood Festival of Speed, or to loan your prized Bernard Buffet to the retrospective in Paris. 

Indeed, transportation is an area where it pays to read the fine print. In the case of Kamidian v Holt an antique clock being displayed in an exhibition was damaged in transit. The owner claimed both for the cost of repair and the depreciation in value caused by the damages.

However, the courts only awarded the cost of repair, holding that there was no real depreciation in value because there had been previous repair work of which the owner had been unaware, and the damage was not visible to the naked eye.