Paint the Town – But Get a Waiver First
One case highlights the many considerations real estate professionals need make when a property includes street art.
What happens when the paint on the outside of a building suddenly becomes a property interest? It's a good question - one addressed in a shocking landmark case involving a New York property known as “5Pointz.”
In the 1970s, developer Jerry Wolkoff purchased vacant factory buildings comprising around 200,000 square feet in Long Island City, Queens, for $1 million. The area was high crime with high vacancy, and Wolkoff's plans were to hold the site for eventual redevelopment. In the '90s, Wolkoff granted local graffiti artists permission to lease space in the property and cover the walls - inside and out - with graffiti and other forms of aerosol art. Over time, the site gained notoriety and acquired the 5Pointz moniker, representing the five boroughs of New York. In the early 2000s, Wolkoff granted Jonathan Cohen, a graffiti artist with the street name MeresOne, control of the site. Cohen began curating the exterior spaces, helping to decide which areas of the walls were granted to various artists, while handling other caretaking and management duties.
Over the years, the colorful buildings, highly visible from the 7 train in Queens, attracted attention from other artists, tourists, and art enthusiasts. The site hosted busloads of visitors, schoolchildren, and even wedding parties. It was also featured in movies, music videos, and ad campaigns.
In 2013, when Wolkoff believed the land had appreciated enough to begin his redevelopment to residential towers, he notified Cohen of his intentions. The artist community that came to call 5Pointz home was alarmed. After unsuccessful attempts to have the site declared a landmark or to buy it, the artists sought a preliminary injunction to prevent the demolition of the buildings under the Visual Artists Rights Act of 1990, or VARA. In 2013, a U.S. District court denied the injunction, but Wolkoff had the buildings almost completely whitewashed before the written ruling was issued.
Nine 5Pointz artists sued for damages under VARA, and Judge Frederic Block shocked the real estate world in February 2018 by finding for the plaintiffs. He awarded statutory damages for the destruction of 45 works, totaling $6.75 million. It was the first time that VARA had successfully been applied to works done in spray paint on exterior walls. Many property owners and developers were incredulous that such a law even existed - and that it may apply to the many properties increasingly being decorated with what has become known as street art.
How Does VARA Impact Real Estate?
VARA is an amendment to federal copyright law meant to protect the moral rights of visual artists, specifically rights of attribution and integrity. A few elements in the law that are of particular interest to commercial real estate professionals include:
- A work cannot be altered or destroyed in any way without the permission of the artist.
- VARA applies only to works of visual art, such as paintings, collages, mosaics, sculpture, and mixed-media works.
- It is in effect until the death of the artist.
- A work can be removed or destroyed if the property owner has given documented notice to the artist and granted 90 days for the artist to have the work removed or documented (at the artist's expense).
- VARA rights cannot be transferred to another person or entity, but they can be waived by the artist. A waiver must explicitly identify the artist, work, location, and uses.
- Copyright registration is not necessary for a VARA claim.
- Works intended to be temporal such as chalk drawings or sand paintings are not likely protected by VARA.
- Works must be of “recognized stature” to have VARA protection. The case law, however, has allowed a wide interpretation of this clause.
- Some states, including California, New York, and Pennsylvania, have additional moral rights laws that may exceed VARA's protections.
In the 5Pointz case, the judge found the developer acted willfully in violation of the artists' rights and awarded the maximum of $150,000 for each of the 45 works. The developer filed a post-trial motion to vacate the decision or to grant a new trial, but it was denied in June 2018.
The 5Pointz case is not the only instance of street art being protected under VARA, though it had the biggest impact for commercial real estate professionals. In 2006, artist Kent Twitchell was awarded $1.1 million after the federal government painted over a mural in Los Angeles. Artist Katherine Craig sued under VARA in 2016 to prevent a developer from destroying her mural in Detroit when the owner planned to redevelop the building into multifamily units. The parties reached a confidential settlement in 2017, which included an agreement to redesign the building plans to keep the mural intact.
Can Property Owners and Street Artists Work Together?
Despite the shockwaves from the 5Pointz decision, property owners and artists can continue collaborating in easy, inexpensive ways. Here are some ways to protect property interests:
- If commissioning a mural or other work on the interior or exterior of a building, ask the artist to sign a waiver of VARA rights before the work has begun. Have this reviewed by an attorney and ensure that the waiver is transferrable to future owners of the property. Many artists will sign a waiver in exchange for fair compensation.
- In an acquisition, if any artwork is visible on site (murals, sculptures, etc.), investigate whether a VARA waiver was filed. If not, due diligence is necessary to look into whether the art may qualify as recognized stature and if the artist is still living. If there is a chance that VARA applies, make attempts to secure a waiver from the artist prior to the sale, which may be easier if the artist is offered compensation.
- If a mural or graffiti is done without the property owner's permission, VARA likely would not apply, but case law has not well defined this yet. The property owner should take steps to remove unwanted artwork as soon as possible.
- Landlords should ensure that tenants are not installing murals or street art without prior written permission. Landlords should insist on a VARA waiver before granting permission.
- If redevelopment of the site is planned without a waiver, the owner must give the artist written notice and 90 days to remove or document the work.
- Owners may consider an escrow to cover a potential VARA claim in the future if due diligence is impossible or inconclusive.
- Owners should not underestimate the power of neighbors' interests in protecting beloved murals or other works of art in communities. Developers would be well advised to manage the press and community groups if the plan is to redevelop a property, even if the work would not be covered by VARA.
- Developers may want to consider incorporating existing work into a new development plan, especially if the work can be moved or converted into an interior wall. VARA doesn't protect a work's location or the public's ability to view the work.
Street art can be an inexpensive and engaging way for property owners to enliven their buildings. But real estate professionals need to be well versed in the overlap of property rights and the moral rights of artists.