Can I refuse a no-sale clause as a lender?

Yes. A loan agreement is a contract, and a restriction on selling is a term you negotiate. Museums do ask for it, and not without reason. A loan often runs for years and an exhibition is built long in advance. Sell the work halfway through and the museum is left with a gap on the wall, and sometimes with a new owner who sets different conditions. There is room between yes and no. Limit the clause to the run of the exhibition rather than the whole loan period. Or agree that a sale is allowed provided the buyer takes over the loan on the same terms. A duty to notify, with a reasonable period, often works better in practice than an outright ban. Whatever you do, do not sign away more of your ownership than the exhibition actually requires.

What is nail-to-nail insurance?

Nail-to-nail insurance covers an artwork from the moment it is taken off the wall at one location until it hangs again at the other. The cover therefore runs during packing, transport, storage, the exhibition itself and the journey back. This form of insurance is standard for loans between museums, galleries and private collectors. The lender almost always makes it a condition that the borrower takes out such a policy. Understandably so: without that cover the owner bears the full risk of damage or loss. What many people overlook: not every policy covers the same risks. Some expressly exclude war, terrorism or gradual deterioration. Have the policy conditions reviewed in legal terms before you sign a loan agreement.

What does a nail-to-nail policy not cover?

The name suggests complete cover. It is not. War and nuclear risks are excluded as standard, as are intent and fraud, and gradual deterioration. That last one is the most underestimated. Fading from light, craquelure, corrosion and mould count as inherent vice of the work rather than a sudden event. Terrorism is sometimes excluded and sometimes insurable for an additional premium. The policy conditions themselves narrow the cover too. Depart from the agreed carrier, route or packing, or keep the work at an address other than the one in the policy, and the insurer may refuse. Conservation work carried out during the loan usually falls outside it. Finally, watch the agreed value. That figure is the ceiling, even if the work has become more valuable in the meantime. Loss of value after a successful restoration is a separate point, because some policies compensate it and others do not. Have the conditions checked before you sign the loan agreement.

I am lending a work from my private collection to a museum. What should I watch out for?

Four points above all. The insured value, because it determines what you get if things go wrong, and for a work that has not been on the market for years that figure is not obvious. The policy, usually nail to nail, which the museum takes out and pays for. The arrangements on transport and climate, which the museum records in a facility report. And whether the museum wants a sale restriction, because a clause like that can tie up your collection for years. Have the agreement checked before you sign. The standard templates in circulation are written from the borrowing museum’s point of view, not the lender’s.

What if an artwork comes back damaged after a loan?

Insurance usually covers the restoration costs. Loss of value is another matter. Suppose a painting has been expertly restored and is still worth less than before, whether that difference is compensated depends on the policy conditions. The loan agreement can set out how the loss of value is established, by whom, and who bears the cost. Arrange that in advance, because once the damage is there the positions have usually hardened.

How long can a loan last?

That is up to the parties. Loans range from a few weeks for a temporary exhibition to decades for a long-term loan that forms part of a permanent collection display. With those long loans it is sensible to review periodically whether the terms still fit. The insured value in particular shifts considerably over time.

Loan agreement for artworks

Lend a work and you hand it over. It goes into a truck, it is packed and unpacked, and then it hangs in a room where someone else controls the climate.

Plenty can go wrong there. Damage in transit or during installation. Room conditions that turn out not to match what the lender stipulated. And once in a while, seizure of a work sitting abroad.

Museums lend to each other, collectors lend to museums, corporate collections lend to both. The loan agreement divides the risks of that traffic. Even so, drafting it is treated as an administrative formality. Once there is damage, the small print turns out to matter.

What follows is Dutch law and Dutch market practice. It applies to loans between Dutch institutions and, in most cases, to loans crossing the Dutch border either way.

What a loan agreement for artworks should cover

Seven subjects decide whether a loan agreement holds up.

The value of the work. Lender and borrower agree an insured value, and that figure is the basis for the policy. For contemporary art, and for works that have not been traded in years, the amount is an estimate. Value it too low and the lender falls short if the work is lost. Value it too high and you pay premium on thin air.

Insurance. Nail-to-nail cover is the museum standard. The policy runs from the moment the work comes off the wall at the lender to the moment it hangs back in place, transport included. All risk does not cover everything. Wear and tear, inherent defects, gradual deterioration and war damage are generally excluded. The borrower takes out the policy and pays for it.

Transport. For valuable works you bring in art shippers who know how to pack and move a fragile object. The agreement says who arranges transport, who picks the shipper, who carries the risk on the road, and whether a courier travels with the work.

Display conditions. Temperature, humidity, light levels. The borrower enters those figures in a facility report beforehand and the lender assesses it. The agreement refers to that report and says what happens if the room turns out differently in practice.

Liability for damage. This is what it comes down to. The borrower usually carries the risk for as long as the loan runs. Which leaves the question of what gets paid out. Restoration costs are countable, but a unique work can be worth less after a successful restoration than it was before.

Reproduction rights. Catalogue, website, promotional material, Instagram. May the borrower show the work there, and on what terms? You settle that in the agreement, separately from the copyright permission you need from the artist or from Pictoright.

Sale restrictions. Larger museums sometimes stipulate that the lender may not sell the work for a period afterwards. The reasoning is that the museum put the work in an exhibition and the lender should not cash in on that straight away with an extended exhibition history. Such a clause is negotiable. One variant has the lender pay over part of the proceeds on a sale within an agreed period after the exhibition.

When the Indemnity Scheme lowers your insurance premium

For an exhibition built on masterworks from foreign museums, insurance premiums can climb until the project no longer adds up. That is what the Indemnity Scheme (Indemniteitsregeling) is for. The State takes on part of the risk of damage, the museum buys less commercial cover, and the premium drops sharply.

Far from every exhibition qualifies. Conditions apply to the significance of the exhibition, the value of the loans and the professionalism of the organising institution. Applications run through the Cultural Heritage Agency of the Netherlands (Rijksdienst voor het Cultureel Erfgoed).

International loans and the risk of seizure

Cross a border and a layer is added. Each country has its own rules on the import and export of cultural goods, and sometimes an export licence comes with it. Seizure is the riskier part. A creditor can go after a work that happens to be standing in that country. The Netherlands has no statutory immunity from seizure for loans, although arrangements and protocols exist that limit the risk.

The years-long legal battle over the Crimean treasures at the Allard Pierson shows how far that can go. Works lent from Ukraine ended up, through the Russian annexation of Crimea, in an ownership dispute fought out before the Dutch courts.

Jaap advises museums, collectors and corporate collections on drafting and reviewing loan agreements. He looks past the standard clauses at the risks that apply to your loan.

More about legal advice for museums →

More about inheriting and bequeathing art →

Get in touch with Jaap Versteeg

Do you want a loan agreement drafted, reviewed or amended? Or is there a dispute about a loan? Get in touch with Jaap Versteeg. Call 020 675 88 21 or email him for an initial consultation.

Frequently asked questions about loan agreements

Yes. A loan agreement is a contract, and a restriction on selling is a term you negotiate.

Museums do ask for it, and not without reason. A loan often runs for years and an exhibition is built long in advance. Sell the work halfway through and the museum is left with a gap on the wall, and sometimes with a new owner who sets different conditions.

There is room between yes and no. Limit the clause to the run of the exhibition rather than the whole loan period. Or agree that a sale is allowed provided the buyer takes over the loan on the same terms. A duty to notify, with a reasonable period, often works better in practice than an outright ban.

Whatever you do, do not sign away more of your ownership than the exhibition actually requires.
Nail-to-nail insurance covers an artwork from the moment it is taken off the wall at one location until it hangs again at the other. The cover therefore runs during packing, transport, storage, the exhibition itself and the journey back.

This form of insurance is standard for loans between museums, galleries and private collectors. The lender almost always makes it a condition that the borrower takes out such a policy. Understandably so: without that cover the owner bears the full risk of damage or loss.

What many people overlook: not every policy covers the same risks. Some expressly exclude war, terrorism or gradual deterioration. Have the policy conditions reviewed in legal terms before you sign a loan agreement.
The name suggests complete cover. It is not.

War and nuclear risks are excluded as standard, as are intent and fraud, and gradual deterioration. That last one is the most underestimated. Fading from light, craquelure, corrosion and mould count as inherent vice of the work rather than a sudden event. Terrorism is sometimes excluded and sometimes insurable for an additional premium.

The policy conditions themselves narrow the cover too. Depart from the agreed carrier, route or packing, or keep the work at an address other than the one in the policy, and the insurer may refuse. Conservation work carried out during the loan usually falls outside it.

Finally, watch the agreed value. That figure is the ceiling, even if the work has become more valuable in the meantime. Loss of value after a successful restoration is a separate point, because some policies compensate it and others do not. Have the conditions checked before you sign the loan agreement.
Four points above all. The insured value, because it determines what you get if things go wrong, and for a work that has not been on the market for years that figure is not obvious. The policy, usually nail to nail, which the museum takes out and pays for. The arrangements on transport and climate, which the museum records in a facility report. And whether the museum wants a sale restriction, because a clause like that can tie up your collection for years.

Have the agreement checked before you sign. The standard templates in circulation are written from the borrowing museum’s point of view, not the lender’s.
Insurance usually covers the restoration costs. Loss of value is another matter. Suppose a painting has been expertly restored and is still worth less than before, whether that difference is compensated depends on the policy conditions. The loan agreement can set out how the loss of value is established, by whom, and who bears the cost. Arrange that in advance, because once the damage is there the positions have usually hardened.