LETTER ABOUT THE INSURANCE CHARGES OF MAJOR AUCTIONEERS PRINTED IN THE ANTIQUES TRADE GAZETTE, 13 JANUARY 2001

Dear Sir,

The seller of lot 1 in Sotheby's English Literature and History Sale on 19 December 2000 must have been delighted at the hammer price of £180,000 realised by the sale of his seventeenth-century pictorial alchemical manuscript, though he will perhaps be less so when the settlement cheque for about £152,035 arrives (seller's commission - 15% up to £30,000 and 10% thereafter - at £22,912.50 including VAT, the cost of five colour illustrations at £2,937.5 [if all were charged for] including VAT and insurance at £2,115 including VAT). [He perhaps will also not take into account the further £21,150 retained as the buyer's premium by the auctioneers and the VATman.]

His degree of his delight will doubtless be reckoned against the expectations of the auctioneers expressed in the pre-sale estimate of £6,000-£8,000 printed in the catalogue. He will not, moreover, since it sold, have to worry about what might have happened had the manuscript been lost or irreparably damaged before the sale had he accepted insurance by Sotheby's at its normal rate of 1% plus VAT.

Under those circumstances (especially because major auction houses have an interest in keeping pre- sale insurance payments to a minimum because they tend to self-insure items at levels below about £250,000), he would, according to the conditions of business printed in the catalogue, have received gross compensation only at the mid-estimate of £7,000, which, less seller's commission at £1,233.75 [15% below £30,000] including VAT, insurance at £82.25 including VAT and illustrations at say £2,937.5 [if all were charged for] including VAT, would have resulted in £2,746.5 net.

Given the second scenario, which provides pre-sale cover sometimes for up to six months, and since Sotheby's and the-by-then former owner's liability for insuring the item passes to the buyer at a maximum of five days after the fall of the hammer, why should owners pay insurance calculated on hammer prices and not just on the estimates, whatever the item realises at auction? Effectively, the insurance premium to the former owner of Lot 1 for up to five days' post-sale cover was £2,032.75 including VAT [£2,115 paid on the hammer price less £82.25 paid on the pre-sale mid-estimate], not reducing if the item were collected or paid for before then.

Consider also that Christie's New York, for instance, charges only 0.5% insurance to buyers (it would be about £1,000 on the hammer price and premium in the case of the alchemical manuscript) for after- sales' storage even though the property no longer remains on its own premises.

Is everything right in the state of Denmark?

Roy Davids