Contrato de Arras Explained — The Spanish Deposit Contract

Spanish law recognises three different types of arras, each with very different consequences if the deal falls through. Understanding the difference is essential, because the type is often not explicitly stated in the contract — your lawyer must check.

1. Arras Penitenciales (Penalty Deposit) — the most common type

This is by far the most frequently used type in residential property transactions. Under arras penitenciales (Article 1,454 of the Spanish Civil Code):

• If the buyer pulls out, they lose the deposit
• If the seller pulls out, they must return double the deposit to the buyer

This creates a symmetrical penalty: both parties have skin in the game. On a €300,000 purchase with a 10% deposit (€30,000), the buyer risks losing €30,000 if they withdraw, and the seller risks paying €60,000 (returning the original €30,000 plus a penalty of €30,000).

2. Arras Confirmatorias (Confirmatory Deposit)

Under arras confirmatorias, the deposit is simply a partial payment towards the purchase price. There is no right for either party to walk away by forfeiting or doubling the deposit. Instead, the contract is fully binding, and if either party defaults, the other can seek specific performance (forcing completion) or damages through the courts.

This type is more common in commercial transactions and gives both parties stronger enforcement rights — but less flexibility.

3. Arras Penales (Penal Deposit)

Arras penales work similarly to confirmatorias, but with the added provision that the deposit serves as a pre-agreed damages amount if the buyer defaults. The seller can keep the deposit and pursue additional damages. This type is uncommon in residential sales and is generally less favourable for buyers.

Your lawyer's role: Ensure the contract clearly specifies arras penitenciales if that is the agreed arrangement. If the contract is ambiguous, a court may interpret the deposit as arras confirmatorias, which could mean you are forced to complete or face a damages claim — even if you intended the deposit to be your maximum exposure.

A properly drafted contrato de arras should include all of the following elements. If any are missing, your lawyer should flag this before you sign:

• Full identification of both parties: Names, passport/NIE numbers, and addresses of buyer(s) and seller(s)
• Property description: Full address, Land Registry reference (finca registral), catastral reference, and a description that matches the nota simple
• Purchase price: The total agreed price in euros, stated clearly and unambiguously
• Deposit amount: Typically 10% of the purchase price, though this is negotiable
• Type of arras: Explicitly stated as arras penitenciales (or whichever type is agreed)
• Completion deadline: The date by which the escritura must be signed at the notary — typically 30–90 days after signing the contrato de arras
• Conditions and clauses: Any conditions that must be met before completion (e.g. mortgage approval, planning checks, community debt clearance)
• Distribution of costs: Who pays which costs (the standard in Spain is that the buyer pays taxes, notary, and registry; the seller pays plusvalía and agent commission)
• Inventory: If the property is sold furnished or with fixtures, a detailed inventory should be annexed to the contract
• Seller's declarations: Confirmation that the property is free of charges, debts, and tenants (or disclosure of any that exist)

The contrato de arras is a private document — it does not need to be signed before a notary. However, it is legally binding once signed by both parties. Never sign without your lawyer's review and approval.

The standard deposit on a contrato de arras is 10% of the purchase price, but this is a convention, not a legal requirement. The deposit amount is negotiable, and there are circumstances where a different amount may be appropriate:

Scenario	Typical Deposit	Rationale
Standard resale purchase	10% of purchase price	Market convention; provides meaningful commitment from both parties
Seller wants higher commitment	15–20%	Sometimes requested in a fast-moving market; negotiate carefully
Buyer needs time for mortgage approval	5–10%	A lower deposit reduces your exposure while awaiting the bank's decision
Long completion period (6+ months)	10–15%	A larger deposit gives the seller confidence during a long wait
Off-plan / new-build	Varies (stage payments)	Typically 30–40% during construction, balance on completion — different contract structure

How to pay the deposit:

The deposit should be paid by bank transfer to the seller's account or to your lawyer's escrow account. Never pay in cash, and never pay directly to the estate agent unless your lawyer has confirmed the arrangement. Keep the transfer receipt as proof of payment.

If you are transferring pounds to euros for the deposit, use a specialist currency broker to minimise exchange rate costs. This is one of the first significant transfers you will make, and the savings start here.

Under arras penitenciales, the buyer's maximum penalty for pulling out is loss of the deposit. This is the "escape clause" that makes penitencial arras a relatively buyer-friendly arrangement — you know your worst-case exposure from the outset.

Common reasons buyers pull out:

• Mortgage application is refused
• Survey or due diligence reveals serious problems
• Change of personal circumstances (job loss, relationship breakdown, illness)
• Better property found elsewhere
• Exchange rate moves adversely, making the purchase unaffordable

Losing a 10% deposit is painful — on a €300,000 property, that is €30,000 — but it is a known and capped risk. This is why it is so important to complete your due diligence before signing the contrato de arras wherever possible, and to include protective clauses for known risks (see below).

Important note: Under arras confirmatorias, pulling out does not simply mean losing the deposit. The seller can pursue you for specific performance (forcing you to complete) or for damages exceeding the deposit amount. This is why the type of arras must be clearly specified in the contract.

Under arras penitenciales, if the seller decides not to sell, they must return your deposit plus an additional penalty equal to the deposit amount. In other words, you receive double your deposit back.

On a €30,000 deposit, the seller would owe you €60,000. This symmetrical penalty is designed to discourage sellers from accepting a higher offer from another buyer after signing the contrato de arras with you.

Common reasons sellers pull out:

• A higher offer arrives after the contrato de arras is signed
• Change of personal circumstances
• The seller cannot resolve a legal issue (e.g. an outstanding charge that cannot be cleared)

Enforcing the penalty: If the seller refuses to return double the deposit voluntarily, you have the right to pursue the claim through the Spanish courts. This can be a slow process (6–12 months or more), but the legal position is clear. Having the signed contrato de arras and proof of the deposit payment makes your case straightforward.

In practice, sellers rarely pull out once a contrato de arras is signed, precisely because the double-return penalty is a powerful deterrent. The contrato de arras protects the buyer as much as it commits them.

The contrato de arras is negotiable — it is not a standard form that you simply sign. Your lawyer should fight for clauses that protect your interests. The most important protective clauses include:

• Mortgage contingency clause: If you are financing the purchase, the contract should state that the buyer can withdraw and receive a full refund of the deposit if mortgage approval is not obtained within a specified timeframe. Without this clause, you lose the deposit if the bank says no.
• Due diligence clause: The contract should allow a period (typically 7–14 days) for your lawyer to complete legal checks. If due diligence reveals a material issue (illegal construction, undisclosed debts, planning problems), you should be entitled to withdraw with a full refund.
• Clear title clause: The seller warrants that the property is free of charges, debts, tenants, and legal proceedings — or discloses any that exist and agrees to resolve them before completion.
• Completion date with reasonable flexibility: The deadline should be achievable given the mortgage timeline, currency transfer logistics, and any other dependencies. If the seller sets an unreasonably short deadline, negotiate more time.
• Penalty for late completion: If the seller causes a delay (e.g. failing to clear a charge), the contract should specify compensation or the right to extend the deadline without penalty.
• Inventory annexe: If the property is sold with furniture, appliances, or fittings, a detailed inventory should be attached to the contract. Verbal promises to leave the kitchen appliances are not enforceable without written documentation.

Not every seller will agree to every clause, and negotiation is normal. But a competent lawyer will ensure the essential protections are in place. If the seller refuses a mortgage contingency clause and you are relying on finance, think carefully before proceeding — you could lose your deposit through no fault of your own.

Many estate agents on the Costa del Sol ask buyers to sign a reservation agreement (documento de reserva) and pay a smaller deposit — typically €3,000–€6,000 — before the contrato de arras is prepared. This reserves the property and takes it off the market while your lawyer conducts initial due diligence.

Key differences between a reservation agreement and a contrato de arras:

• The reservation deposit is usually much smaller than the contrato de arras deposit
• The reservation is typically non-binding or has a short cooling-off period (7–14 days)
• The reservation deposit may or may not be refundable — check the terms carefully
• The reservation does not set all the legal terms of the sale — it simply holds the property while the full contract is prepared

Tips for handling reservations:

• Have your lawyer review the reservation document before you sign — not after
• Ensure the reservation explicitly states under what circumstances the deposit is refundable
• Ideally, the reservation deposit should be deducted from the contrato de arras deposit (and ultimately from the purchase price)
• Never sign a reservation agreement that commits you to the full purchase without your lawyer's review

The reservation is a useful practical tool — it gives you time to arrange due diligence without another buyer stepping in — but it is not a substitute for the contrato de arras. Your lawyer should be involved from the reservation stage onwards.