The accounts become operational on August 1, initially for sales in the UK and Australia, where the arrangement has been tested over the past year at Bonhams & Goodman. Bonhams expect to extend the policy to the US by the end of the year when their new computer management system is fully up and running.
The new policy ensures that all money received by Bonhams on behalf of vendors is held in a separate account on trust for the clients’ benefit. After deducting its commissions, expenses and VAT, the balance of the money will be paid to the relevant seller on the due date for payment. In the meantime no one is entitled to touch the money in the account for any purpose.
Bonhams chairman Robert Brooks told the Antiques Trade Gazette that, as well as being good for the standing of the industry, the move made sound business sense, and he had already secured a big UK property on the strength of it.
“Over the years it has become increasingly clear to us that auction house vendors (sellers) are unaware that their money funds the operation of most auctioneers’ businesses. People just assume that their funds are utterly secure. So we are putting right what was a less than perfect system by offering real security and greater transparency. It is simply good business sense.”
Although a number of UK provincial auction houses have already made a similar move, the major international auction houses have always lumped in sales takings with their general company funds. As such, clients’ money has not been ringfenced to protect it from use by others, such as creditors.
Mr Brooks said his company’s decision to introduce trust accounts was a development long overdue at the industry’s top level.
“Vendors need to know that when they are dealing with a reputable auction company their money is completely safe. We will provide that security through our trust account.”
There is no doubt that, by leading the way at the top end of the industry, Bonhams will also garner significant kudos for being seen to make business more transparent and trustworthy.
Bonhams’ new policy has won praise from Louis Armstrong, the chief executive of the Royal Institute of Chartered Surveyors (RICS), whose regulations demand that members maintain designated accounts for their clients. “I am delighted with Bonhams’ initiative – the RICS will continue to work with its members in the fine art auctioneering profession to ensure high standards of probity and service.”
• The RICS and auctioneers across the UK were outraged earlier this year at the potential damage done to the reputation of auctioneers in general when car auctioneer Coys of Kensington (Sales) Ltd, one of a number of subsidiaries of the Coys group, was declared insolvent, having failed to pay out vendors from their December sale. It was granted a Creditors’ Voluntary Arrangement with a debt of approximately £1.65m. Vendors were offered just under a quarter of the money owed to them. Had their money been in separate trust accounts instead of being lumped in with the company’s assets, it would not have been affected by the firm’s demise.
Bonhams ringfence vendors’ money in trust accounts: Will Sotheby’s and Christie’s follow suit?
BONHAMS are to set up separate client trust accounts for vendors to protect their money during the sale process. They are the first of the three major international auction houses to do so and the move effectively throws the gauntlet down to Sotheby’s and Christie’s to follow suit.
