Contrato de arras: everything you need to know about deposit agreements in Spain

Contrato de arras in Spain
What is a "contrato de arras" in Spain? / Pixabay
1 March 2021, Redaction

In Spain, the "contrato de arras", known in English as a deposit contract or deposit agreement, is a fundamental document and, in most cases, an essential requirement to seal an agreement for the purchase of a property in Spain. Although for many buyers it may seem like just another formality, especially after having searched for months and months for the ideal home, it is a contract that commits both parties to the sale. But what exactly is this deposit contract in Spain and how does it work? 

What is the purpose of a deposit contract in Spain?

First and foremost, an 'arras' contract in Spain serves to give peace of mind to all parties involved in a property sale, as this agreement contract ensures in writing that the conditions agreed for the sale property are obeyed. If the buyer finally decides not to buy the property having signed this contract, then logically they will lose the amount of money that has been paid as a deposit. On the other hand, if the seller causes the sale to fall through and does not sell the property as agreed, then normally they have to return double the deposit amount.

Is a deposit contract compulsory in Spain?

It could be said that the deposit contract serves as preparation for signing the purchase contract. But why not sign the purchase contract directly? Is it compulsory to sign a deposit contract in Spain? The answer is, no, it isn't compulsory at all and you can sign the purchase contract directly and people often do. It is not always necessary to sign a deposit contract beforehand. If both parties agree on price, term, there is no financing that requires additional time, or any other circumstance that prevents the purchase from proceeding, no prior agreement would be necessary and the deed of sale can be signed directly. But this is not always the case. There are many factors that can delay the signing of the deed of sale, such as cancellation of previous charges, verifications of ownership, encumbrances, authorisations, licences, applications for financing, or even a pandemic. There are many and varied reasons that lead to the use of these prior agreements.

Contrato de arras templates

While you will be able to find numerous templates and models online for Spanish deposit agreements, it is best to get help from a lawyer. These preparatory contracts for a sale are often not given the importance they deserve and are often just considered as a mere reservation with no further consequences. However, we've already mentioned, there are serious consequences if the conditions in this contract are broken by either party. 

In Spain, a deposit contract is usually signed before a notary which will provide you an additional guarantee, although in some cases they can also be signed in an estate agency. The notary informs the parties in detail of the conditions involved so that they can make a decision appropriate to the circumstances, in full knowledge of the conditions, as well as of the deadlines that may be needed to get everything ready. As the regulation of these agreements is very scarce, and therefore their scope is very broad, it is best to seek professional help.

What is normally included in a desposit contract in Spain?

  • Personal details: signing one of these contracts that has been properly drafted will ensure that everyone has the necessary documentation, both in terms of representation, tax, money laundering, foreign investments, etc...
  • Identification of the transferred property
  • Charges, limitations or other relevant circumstances
  • Price for which the purchase and sale is fixed and the amount to be paid at the time of the desposit contract, the advantages and disadvantages for each party of this amount being higher or lower and the nature of the possible options
  • Time limit for the execution of the deed of sale
  • Distribution of expenses, and that each party is aware of what they are signing, as this cannot be changed later unless there is a new agreement between both parties
  • Other issues that may be of interest in each specific case
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