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Property in Spain: What you need to know before making a down payment

The Local
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Property in Spain: What you need to know before making a down payment
contrato de arras spain deposit

If you’re looking to buy property in Spain, you might have heard of or come across the concept of a ‘contrato de arras’ - but what is it, what rights does it give you, and what should you know before signing one?


In English contrato de arras translates to a deposit contract or deposit agreement and is an important, in most cases, essential, legal document to finalise an agreement for the purchase of a property in Spain. 

Although it may seem like another formality in the long process of finding and buying a property, it is an important contract that commits both buyer and seller to the sale, and formalises the initial deposit payment.

In Spain, the deposit to pay to seller when signing the contrato de arras is usually between 5 and 15 percent of the final agreed sale price, a sum that can only be cashed by the owner of the property being sold.


What is the purpose of a deposit contract in Spain?

The main purpose of an arras is to give peace of mind to all parties involved in a property sale, as the agreement contract confirms in writing that the terms agreed for the sale are respected.

Unlike the rental market, where you pay a fianza (deposit) that is returned to you when you leave the property, or if you pull out of renting it, contrato de arras are only for property purchases and work differently: if you sign the deposit contract and then ultimately decide against purchasing the property, then you will lose the amount of money that has been paid as a deposit. 

However if culpability lies with the seller and the transaction of the property doesn’t proceed as agreed, it is custom in Spain that the seller returns double the deposit amount paid in the contrato de arras.

What is normally included in a deposit contract in Spain?

The ‘arras’ usually contains several important details, including key information like personal details: signing one of these contracts ensures that both sides have the necessary documentation, both in terms of finance, representation, tax, citizenship, and so on. It also identifies and details the property itself, and any charges, limitations or other relevant financial circumstances - such as outstanding debts - on the property or land.

It of course includes the price to be paid at both the deposit and payment stage, or outlines a payment plan, and details on other possible payment options such as loans or mortgages. 

The arras also includes a time limit for the execution of the deed of sale, and makes absolutely clear that both buyer and seller are aware of what they are signing because this cannot be changed later unless there is a new agreement made. Once signed, that’s usually it - unless both parties desire a new agreement.


Writing up a contrato de arras 

If you Google contratos de arras you’ll be able to find countless templates, but it is always best to get help from a lawyer regardless of your level of Spanish. You want to be absolutely sure the arras is right and legally binding because although they are considered by many to be a mere reservation or formality, as you already know, there can be serious financial, and possibly legal, consequences if the conditions in this contract are broken by either party.

Another reason it's better to go through a legal expert is because instead of agreeing and signing privately with the property seller, doing it with a lawyer means a notary or independent witness will be present and provide you with an additional guarantee, although they can also be signed at estate agents. 

The witness explains to all parties the conditions of the deposit contact so everyone can make an informed decision in full knowledge of the fact, as well as any deadlines to take account of. It is always best to get legal advice when signing a deposit contract because the regulation of these sorts of agreements is hit and miss in Spain, and therefore their scope can be broad, even more so when doing it directly with a seller, and especially so in a foreign country in a different language.


Make sure you get the nota simple

As we have outlined at The Local before, getting the nota simple is also very important when buying property in Spain. Many lawyers suggest getting a nota simple on the same day as when you sign the arras, as the legal and financial conditions of the property or seller could have changed since you first saw it.


Take a good look at the property before signing: Like getting the nota simple, it's also very important that you give the property a once over before signing the deposit contract. Make sure you do a thorough review before putting pen to paper: make sure the lights work, and taps run; check that heating, and that there are no visible leaks or damage, and so on. This’ll save you potential problems down the road, and could save you time and money.


The price: The total price of both the deposit and full sale price should be accurately and clearly identified on the deposit contract to avoid any disputes down the road that could disrupt the sale. 


Loss of deposit:  It should be put in writing that if the buyer reneges on any of the commitments made in the deposit contract, they will lose the deposit. It should also state clearly that if it is the seller who does not comply with the conditions of the deposit contract, they must pay double the deposit.



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