Due Diligence Demands: The Hidden Legal Costs of Building an Art Collection

As the global art market continues to evolve, so too does the complexity of building a meaningful, valuable collection. For both new and seasoned collectors, understanding the hidden legal costs and due diligence demands is not only prudent—it’s essential. At Artwise, we recognize that the beauty of art comes with an often-overlooked layer of legal stewardship, which can directly impact the security of your investments and the long-term integrity of your collection.

The Expanding Landscape of Legal Risks

The perception that acquiring artworks is a straightforward transaction is outdated. Today, the legal environment of art collecting is shaped by international regulations, evolving concerns around provenance, questions of restitution, and the growing intersection of art and finance—including tokenization of real-world assets (RWAs).

With high-net-worth individuals (HNWIs) now allocating on average 15% of their overall wealth to art, the need for robust processes to validate legal title, authenticity, and compliance with jurisdictional rules has never been greater. According to The Art Basel and UBS Art Market Report 2025, more than 85% of HNW collectors surveyed considered art a relatively safe investment, while nearly a quarter ranked financial considerations as a primary motivation for acquisition. But alongside potential financial rewards, pitfalls abound for the unwary—often in the form of hidden legal costs and the burden of due diligence (Art Basel & UBS, 2025, p. 151).

Provenance, Title, and Restitution: What’s at Stake

Collectors and investors face significant potential liabilities if title is unclear or if work is subject to restitution claims. Restitution of looted artworks, for example, remains a regular and high-stakes topic. As Till Vere-Hodge, a partner specializing in art and cultural heritage law at Payne Hicks Beach LLP, notes: “I advise international private collectors, art dealers and auction houses, galleries, museums, and art investors…on legal issues pertaining to art, cultural property, and other collectibles. Particular expertise is needed handling restitution claims to looted artworks” (Art Basel & UBS, 2025, p. 151).

Proper due diligence demands a thorough review of ownership history, export licenses, provenance documentation, and the legal landscape across all jurisdictions through which a work may have passed. This research is both time-consuming and costly—often requiring the expertise of specialized legal counsel familiar with regional nuances in art law.

Cross-Jurisdictional Complexities and Compliance

Acquisitions across borders further complicate due diligence, introducing a patchwork of local and international regulations. As highlighted in Artnet’s Intelligence Report 2025, the Middle East’s rise as a collecting hub and the cross-border nature of major sales have made transparency and regulatory compliance even more important—especially as collectors seek ecosystems that reflect their priorities for security and cultural connection (Artnet IR, 2025, p. 14).

When purchasing art internationally, collectors may face unexpected legal obligations—ranging from anti-money laundering rules and cultural export restrictions to sanctions compliance. Without proper legal review, these issues can result in forfeiture, fines, or even criminal exposure.

The Role of Advisors and Post-Sale Windows

It is not just about what art to buy, but how and why. Legal costs extend into the advisory process. Art advisors often spend considerable time developing a collection strategy that aligns not only with the collector’s tastes, but also with their legal risk profile and investment goals. The “third, post-fair transactional window,” detailed in the UBS Art Market Report, highlights the importance of advisory input after major fairs or sales, ensuring clients are acquiring not just notable works, but works with clear legal standing and robust documentation (Art Basel & UBS, 2025, p. 151).

Tokenization, Technology, and New Legal Frontiers

The emergence of art tokenization—creating digital tokens representing physical artworks—offers both opportunities and new challenges. Adam Levi, co-founder of the tokenization platform Backed, emphasizes that for tokenized assets, trust is not just technological, but legal: “The guarantee is the issuer’s binding legal obligation to maintain full backing and transparent issuance and redemption mechanics, governed by clear regulations… The foundation is legal, not just code” (Cointelegraph, 2025).

While blockchain can increase transparency, it does not automatically resolve underlying title or regulatory issues. Legal review remains essential to ensure tokens are fully backed by the asset they represent and that their issuance and transfer comply with all applicable laws.

Conclusion: Due Diligence Is an Investment

The hidden legal costs of collecting art—whether for passion, profit, or both—are substantial, but they are also a crucial investment in the long-term value and enjoyment of your collection. From hiring specialized legal experts to conducting thorough provenance research and ensuring regulatory compliance, these costs should be viewed as safeguards rather than burdens. At Artwise, our belief is that informed, diligent collecting benefits everyone—building not only value, but a legacy of trust and security.

References

• Art Basel & UBS Art Market Report 2025, “The Art of Indexing: Quantifying Creativity in the Financial World,” pp. 151, 11, and contributions from Till Vere-Hodge and Alex Glauber.

• Artnet Intelligence Report 2025, “New Money, New Taste,” p. 14.

• Cointelegraph, “How RWA Investors Can Be Sure Of The 1:1 Peg With Tokens?” (2025), quotes from Adam Levi.