To protect your security interest when leaving your artwork regularly on consignment with a particular gallery or dealer for them to sell the work on your behalf, (or if you sell any goods on retention of title terms), you should do the following:
- ensure you have a written consignment contract with your gallery or dealer that broadly describes the goods you have consigned, for example, ‘artworks’;
- register your security interest on the PPSR.
Registration is not compulsory, but it protects your security interest against other creditors. Properly registering your interest can help protect your interest in the event that the gallery or dealer doesn't pay and goes broke.
Risk: If you don’t make a registration against the gallery or dealer and they go broke before they have fully paid you, your artwork may be sold to pay other creditors first.
If you have not registered to protect a retention of title (ROT) arrangement, you will be an unsecured creditor in an insolvency and may not recover much, if anything, of what you are owed.
In the case of consignments, whilst most (those which are ‘commercial consignments) will still be effective on insolvency even if not registered, you should still register them anyway because you don’t want to lose out to other registered security interests, and you do want to have PMSI priority over those other interests, as described above.
Note: If your artworks are being sold or resold through an auction house then the PPS rules don’t apply.
A single registration can cover all consignments that an artist makes to a particular dealer or gallery – each artwork is not required to be registered individually.
In order for one registration to cover all future art consignments, the description of the art in the registration must be broad enough to cover all the property involved, for example ‘artworks’.