Art-backed lending under New York law, and the work held in a Swiss warehouse

The borrower and the work, in Article 9 terms

New York enacted the 2022 amendments to the Uniform Commercial Code by chapter 579 of the Laws of 2025, signed on 5 December 2025 and in force on the 180th day after, 3 June 2026; the sections cited below are those published as in force at the date of this update; where the amended text now says "signed" in place of "authenticated" (sections 9-203, 9-313, 9-611 and 9-615) this update follows it, while sections 9-620 and 9-624 as published still say "authenticated". Article 9 applies to any transaction, regardless of its form, that creates a security interest in personal property by contract (section 9-109(a)(1)), and a security interest is an interest in personal property which secures payment or performance of an obligation (section 1-201(b)(35)). A painting is "goods", things that are movable when the security interest attaches. Whether it is "consumer goods", used or bought for use primarily for personal, family or household purposes, or "inventory", goods held by a person for sale, depends on the use, not on the object (section 9-102(a)(23), (44) and (48)). The distinction runs through the whole of Article 9. A "consumer transaction" is one in which an individual incurs an obligation primarily for personal, family or household purposes, a security interest secures it, and the collateral is held primarily for those purposes (section 9-102(a)(26)). An individual borrowing against the painting in the living room to fund a private purchase is in one; a family-office company, a trust company or a dealer never is, because none of them is an individual, and the consumer rules that follow do not apply to them.

Attachment: the signed agreement and the description

A security interest attaches, and becomes enforceable against the debtor, when value has been given, the debtor has rights in the collateral or the power to transfer them, and either the debtor has signed a security agreement that provides a description of the collateral or the collateral is in the secured party's possession under section 9-313 pursuant to the debtor's security agreement (section 9-203(a) and (b)). The description is sufficient, whether or not it is specific, if it reasonably identifies what is described, by specific listing, by category, by a type of collateral defined in the Code, by quantity or by any other objectively determinable method (section 9-108(a) and (b)); a description as "all the debtor's assets" or "all the debtor's personal property" does not (section 9-108(c)). "Artwork" is not a type of collateral defined in the Code, so "all artwork of the debtor" is a description by category whose sufficiency turns on whether, on the facts, it reasonably identifies the collateral; in a consumer transaction a description of consumer goods only by type is insufficient in any event (section 9-108(e)(2)). In our judgement the security agreement for a collection should schedule each work by artist, title, medium, dimensions, date and inventory number, and should describe the category only as a backstop. An after-acquired property clause is permitted, but in a consumer-goods context it does not reach goods acquired more than ten days after value is given (section 9-204(a) and (b)(1)).

The second condition deserves more time than it gets. The debtor must have rights in the collateral or the power to transfer rights in it (section 9-203(b)(2)). A work the borrower has already sold gives the lender nothing. A work already pledged elsewhere gives it a junior interest, ranked by the first-to-file-or-perfect rule (section 9-322) and exposed if unperfected (section 9-317): a priority and covenant question to be resolved before funding, not a nullity. A work the borrower holds on consignment gives its lender rights only through section 9-319, described below. An individual borrower may not be the owner at all if the work is held through a vehicle. The title and provenance diligence of an acquisition is repeated for the loan, with one more question: who has had possession since the last sale.

Perfection: where the debtor is, not where the painting hangs

A security interest is perfected when it has attached and the applicable step in sections 9-310 to 9-316 has been taken (section 9-308(a)). The default step is a filed financing statement (section 9-310(a)); the exceptions that matter for art are possession and, for a dealer or auction house financing the purchase price of a work bought for a private home, automatic perfection of a purchase-money security interest in consumer goods (section 9-309(1)). Which law governs perfection is settled by section 9-301, which New York letters (a) to (e) where the uniform text numbers (1) to (4): while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or non-perfection and the priority of a security interest in collateral (section 9-301(a)); while collateral is located in a jurisdiction, its local law governs a possessory security interest (section 9-301(b)); and while goods are located in a jurisdiction, its local law governs the effect of perfection and the priority of a non-possessory security interest in them (section 9-301(c)(3)). The debtor's location is fixed by section 9-307: an individual at the individual's principal residence, an organisation at its place of business or chief executive office, and a registered organisation in the state under whose law it is organised. Those rules apply only if the debtor's residence or office is in a jurisdiction whose law generally requires information about the existence of a non-possessory security interest to be made available in a filing, recording or registration system as a condition or result of its obtaining priority over a lien creditor; if that is not so, the debtor is located in the District of Columbia (section 9-307(c)).

Three consequences follow. The loan agreement's governing-law clause chooses the law of the contract only; section 9-301 chooses the law of perfection by location, and a contrary agreement is effective only to the extent the law so specified permits (section 1-301(c)(7)). A financing statement filed in New York against a borrower who lives in Connecticut, a Delaware limited liability company or a Swiss resident perfects nothing; the filing goes where the debtor is located, and for a foreign individual the lender must first answer the section 9-307(c) question, failing which the filing goes to the District of Columbia. And the location of the painting matters for the priority effects and for a possessory interest, not for the filing. Where New York law governs, the filing office for goods is the office of the secretary of state (section 9-501(a)(2)); the financing statement gives the debtor's name, the secured party's name and an indication of the collateral (section 9-502(a)); for an individual holding an unexpired New York driver's licence or non-driver identification card the name is sufficient only if it is the name on that card (section 9-503(a)(4)), a name error is seriously misleading unless the filing office's standard search logic would still find the filing (section 9-506), and a filing lasts five years, continuable only in the final six months (section 9-515).

Possession is the other route, and for a work in storage it is the better one. A secured party may perfect a security interest in goods by taking possession (section 9-313(a)), and it takes possession of collateral held by a third person when that person signs a record acknowledging that it holds possession for the secured party's benefit, or takes possession after signing such a record (section 9-313(c)). The storage facility is not required to acknowledge, and if it does it owes the secured party no duty unless it agrees to one or other law imposes it (section 9-313(f) and (g)); the acknowledgment therefore perfects, but the right to have the work released to the lender, and the lender's right to inspect, insure and instruct, must be written into a three-party agreement between borrower, lender and facility. Where the facility has issued a document of title covering the work, perfection runs through the document instead: by perfecting in a negotiable document, or, for a non-negotiable document, by issuance in the secured party's name, by the bailee's receipt of notification of the secured party's interest, or by filing (section 9-312(c) and (d)). Whether a storage confirmation is a document of title is a question of fact under section 1-201(b)(16), and the lender should read it before deciding which route it is on.

Priority: liens, dealers and consignments

Between competing security interests, priority dates from the earlier of filing or perfection, and a perfected interest beats an unperfected one (section 9-322(a)); an unperfected interest is subordinate to a lien creditor, including a bankruptcy trustee, and to a buyer who gives value and takes delivery without knowledge (section 9-317). Three other claimants are specific to art. A possessory lien created by statute or rule of law in favour of a person who furnishes services or materials with respect to goods in the ordinary course of its business, the storage facility's lien and the comparable statutory liens of conservators and carriers, has priority over a security interest unless the statute creating it provides otherwise (section 9-333); a warehouse has such a lien against the bailor on the goods for storage, transport, insurance and labour charges, present or future, and loses it on voluntary delivery (section 7-209(a) and (e)). The lien does not bind a lender whose interest was perfected before the receipt was issued and who neither entrusted the work to the warehouse nor acquiesced in the receipt (section 7-209(c)), a protection the usual three-party arrangement is likely to forfeit, which is a further reason for the lien waiver or subordination that section 9-339 permits. A buyer in ordinary course of business, buying in good faith and in the ordinary course from a person in the business of selling goods of that kind, takes free of a security interest created by the buyer's seller, even if it is perfected and the buyer knows of it (section 9-320(a)); the rule frees the dealer's customer from the dealer's lender, and it does not affect goods in the secured party's possession (section 9-320(e)), which is a further reason to prefer possession. And consignment to a dealer changes the picture: while consigned goods are in the consignee's possession, the consignee is deemed to have rights and title identical to the consignor's as against the consignee's creditors unless the consignor's perfected interest would have priority (section 9-319), a rule confined to an Article 9 consignment as defined in section 9-102(a)(20), which excludes goods that were consumer goods before delivery, deliveries worth less than USD 1,000 and consignments to an auctioneer; outside that definition the collector's title against the dealer's creditors and buyers is governed by other law, including the entrustment rule in section 2-403(2). The New York statute that makes a consigned work trust property immune from the merchant's creditors protects only an artist, or the artist's successor in interest, consigning the artist's own work (Arts and Cultural Affairs Law, section 12.01); a collector who consigns to a gallery is outside it. A lender should prohibit consignment of the collateral without its consent, and where it consents should require the dealer's signed acknowledgment, a filing against the collector if the lender's perfection until then rested on possession, and, where the arrangement is an Article 9 consignment, a filing by or on behalf of the collector against the dealer (section 9-319(b)).

Movement has its own clock. A security interest perfected under the law of one jurisdiction remains perfected after the debtor's location changes to another jurisdiction only for four months, and after a transfer of the collateral to a person that thereby becomes a debtor located in another jurisdiction only for one year, unless it is perfected under the new law within that time; otherwise it becomes unperfected and, as against a purchaser for value, is deemed never to have been perfected (section 9-316(a) and (b)). A possessory security interest remains continuously perfected on entry into another jurisdiction if it is perfected under that jurisdiction's law on arrival (section 9-316(c)). The covenants on relocation of the borrower and of the work, and the lender's right to refile, exist because of these two periods.

Default: what the lender may do, and what the borrower cannot waive

After default the secured party has the rights in Part 6 and, subject to section 9-602, those provided by agreement, and may always reduce its claim to judgment and enforce it by any available judicial procedure (section 9-601(a)). It may take possession of the collateral, by judicial process or without it if it proceeds without breach of the peace, and may require the debtor to assemble the collateral at a reasonably convenient place (section 9-609). Every aspect of a disposition, including the method, manner, time, place and other terms, must be commercially reasonable (section 9-610(b)); the secured party may buy at a public disposition, but at a private disposition only if the collateral is of a kind customarily sold on a recognised market or the subject of widely distributed standard price quotations (section 9-610(c)), a test the statute does not answer for unique works and the lender should not assume it meets. A reasonable signed notification of disposition goes to the debtor, any secondary obligor and, outside consumer goods, any other claimant who has notified the lender and any secured party or lienholder of record ten days before the notification date (section 9-611(c)); outside a consumer transaction a notification sent after default and ten or more days before the earliest disposition date is sent within a reasonable time (section 9-612(b)). Proceeds are applied to the expenses of retaking, holding, preparing and disposing, to agreed attorney's fees, then to the secured obligation, then to subordinate security interests or liens and to a consignor, each of which must have delivered a signed demand before distribution is completed, with any surplus to the debtor (or, where the collateral was consigned, to the consignor) and any deficiency from the obligor; where the lender or a related person buys cheaply, the surplus or deficiency is computed on the price a complying disposition to a third party would have brought (section 9-615(a), (d) and (f)). Acceptance of the collateral in full or partial satisfaction needs the debtor's consent, given after default or by silence for twenty days after a full-satisfaction proposal (section 9-620(a) and (c)), and the debtor may redeem by tendering the full obligation and expenses at any time before disposition, a contract for disposition or acceptance (section 9-623).

The debtor cannot contract out of the core of this. Section 9-602 lists the rules the debtor or obligor may not waive or vary, among them the breach-of-the-peace limit, the disposition and notification rules, acceptance in satisfaction, redemption and the secured party's liability; the parties may agree standards for those duties if they are not manifestly unreasonable, except for breach of the peace (section 9-603). Where the work is consumer goods and the loan a consumer transaction, the restrictions tighten: in a consumer transaction, no partial strict foreclosure (section 9-620(g)) and no application of the section 9-626(a) deficiency rules, which the statute leaves to the courts (section 9-626(b)); where the collateral is consumer goods and 60 per cent of the cash price or of the principal has been paid, disposition within 90 days after the secured party takes possession, or within a longer period agreed and authenticated after default (section 9-620(e) and (f)), and a statutory minimum damages rule (section 9-625(c)(2)); in a consumer-goods transaction, no waiver of redemption (section 9-624(c)). The only waivers the statute allows are post-default: notification of disposition, the mandatory disposition and, outside a consumer-goods transaction, redemption, each by an agreement authenticated after default (section 9-624). The purpose of the loan and the use of the work, not the borrower's status alone, decide which of these rules apply.

The work in a Swiss warehouse

Now the painting in Geneva. From the Swiss side, the acquisition and loss of rights in rem in movables are governed by the law of the state in which the thing is located at the time of the event from which the acquisition or loss is derived, and the content and exercise of those rights by the law of the place where the thing is (Private International Law Act, Article 100). The parties may subject acquisition and loss to the law of the state of dispatch or destination or to the law governing the underlying transaction, but the choice cannot be asserted against third parties (Article 104); the three-month grace period in Article 102 concerns a retention of title validly created abroad, not a security interest, and should not be read across. A pledge of a claim against the warehouse, as distinct from the painting, follows the law chosen by the parties, again without effect against third parties, and otherwise the law of the pledgee's habitual residence (Article 105).

Swiss substantive law then decides. Under the Civil Code a movable may be pledged, where the law makes no exception, only by transferring possession of the pledged thing to the pledgee (Article 884(1)); the pledge is not constituted while the pledgor retains exclusive control of the thing (Article 884(3)); and a transfer of ownership under which the thing stays with the transferor is ineffective against third parties where it is intended to disadvantage them or to circumvent the rules on the pledge of movables (Article 717). A New York financing statement, however well filed, transfers no possession. A lender who wants security over the work in Geneva that holds against the borrower's Swiss and foreign creditors therefore needs the work to be held for it: by the warehouse keeper under an arrangement, settled with Swiss counsel, under which the keeper holds the work for the pledgee and releases it only on the pledgee's instruction (possession can pass without physical delivery where a third party keeps the thing and is notified of the transfer, Article 924), or by the pledgee's own custodian. Two Swiss rules shape that arrangement. The warehouse keeper has a retention right over the goods for its charges for as long as it has possession or can dispose of the goods through a warehouse receipt (Code of Obligations, Article 485(3); Civil Code, Article 895), so the keeper's claim for its charges stands against the lender's pledge unless the keeper waives or subordinates it, and the ranking is for Swiss counsel to confirm. And in the keeper's bankruptcy the administration decides on the release of things claimed by a third party and, where it considers the claim unfounded, sets the third party a 20-day period to sue, failing which the claim is forfeited (Debt Enforcement and Bankruptcy Act, Article 242); the inventory of the warehouse, which for cultural property in a duty-free warehouse records the owner's name and address (Customs Ordinance, Articles 182(2) and 184(1)(c)), and the lender's own documentation are the evidence on which that claim is made. The Swiss pinpoints above are from the German texts; the English translations on Fedlex have no legal force.

For the Geneva work the sequence is the reverse of the New York one: in New York the filing is the default and possession the refinement; in Switzerland possession, direct or through the keeper, is the condition of there being any security at all, and the New York filing is kept for the proceeds, the debtor's other assets and the day the work comes home. The customs status of the warehouse, the cultural-property declaration that storage requires and what changes on a sale or a shipment are separate questions with rules of their own.

What this means for you

• The governing-law clause does not choose the law of perfection. Section 9-301 chooses it by the location of the debtor and, for possessory interests and priority effects, of the collateral; section 9-307 fixes where a debtor is located. The clause governs the loan contract only.
• File where the debtor lives or is organised, not where the painting hangs. A New York filing against a Connecticut resident, a Delaware company or a Swiss resident perfects nothing; for a foreign individual, answer the section 9-307(c) question first. Name the individual as on the driver's licence (section 9-503), schedule the works (section 9-108), and refile within four months of the debtor's move to another jurisdiction, or within one year of a transfer to a new debtor located elsewhere (section 9-316).
• For a work in storage, take possession through the facility. A signed acknowledgment that the facility holds for the lender perfects (section 9-313(c)) and keeps the work outside section 9-320; the release, inspection and insurance rights must be in the three-party agreement, because the acknowledgment creates no duty (section 9-313(g)).
• Storage and conservation liens rank ahead unless waived. A statutory possessory lien beats the security interest (section 9-333) unless section 7-209(c) excludes it; the warehouse lien covers storage, transport, insurance and labour charges (section 7-209). Take a waiver or a subordination (section 9-339).
• Dealers and consignments are the leak. A buyer in ordinary course from a dealer takes free of the dealer's lender (section 9-320(a)); a collector consigning to a gallery is outside the artist-consignment statute (ACAL section 12.01). Prohibit consignment without consent; where it is allowed, take the dealer's acknowledgment, file against the collector if perfection rested on possession, and have the collector file against the dealer where section 9-319 applies.
• An individual borrower may bring the consumer rules, which turn on the purpose of the loan and the use of the work and can be waived only after default. Type-only descriptions fail in a consumer transaction and after-acquired consumer goods beyond ten days are out; on default there is no partial strict foreclosure in a consumer transaction, a disposition of consumer goods within 90 days of taking possession once 60 per cent is paid, no waiver of redemption in a consumer-goods transaction and a statutory minimum damages rule (sections 9-102(a)(23), (24), (26), 9-108(e), 9-204(b), 9-602, 9-620, 9-624, 9-625).
• In Switzerland, possession is the security. Rights in rem follow the work (IPRG Article 100); a pledge of a movable needs transfer of possession and is not constituted while the owner keeps exclusive control (Civil Code Article 884); the keeper's retention right and the bankruptcy segregation procedure shape the custody agreement (Code of Obligations Article 485(3); SchKG Article 242). A New York filing alone does not create a Swiss pledge over a work that is in Switzerland when the security is taken.

Isak Legal advises lenders, collectors and family offices on loan and security documentation for art-backed lending under New York and English law, on custody, warehouse and release arrangements, and on the Swiss-law position of works held in Switzerland, with a registered Swiss lawyer where Swiss law requires one. See our Art Law, United States and Switzerland pages, or get in touch.

This client update is provided for general information only, reflects the position as at 1 October 2026 and does not constitute legal advice or create a lawyer-client relationship. The New York position is taken from the Uniform Commercial Code and the Arts and Cultural Affairs Law as enacted in New York and published by the New York State Senate, in the versions in force on 1 October 2026 (the 2022 UCC amendments took effect in New York on 3 June 2026 under chapter 579 of the Laws of 2025); New York law is one state's law. The Swiss position is taken from the Private International Law Act (SR 291), the Civil Code (SR 210), the Code of Obligations (SR 220) and the Debt Enforcement and Bankruptcy Act (SR 281.1) as published on Fedlex (German texts). Verify the current texts at the official sources linked above before acting. For advice on a specific matter, please contact us.