What is the Spanish Contrato de Arras: 5 essential considerations before signing

Learn what a contrato de arras is and discover 5 tips to keep in mind when signing this contract for buying a property in Spain.

Nicholas Vinberg
Written by Nicholas Vinberg
Published at 2023-08-16T15:01:29Z
Last updated at 2023-11-07T13:15:54Z
Readtime 2 minutes

Embarking on the journey of buying property in Spain is an exciting adventure, filled with opportunities and challenges.

For those unfamiliar with the Spanish legal landscape, one term that may arise is the "contrato de arras." This term, unique to Spanish law and without a direct English equivalent, refers to a specific type of deposit agreement.

What is a contrato de arras in Spain?

The contrato de arras is a reservation agreement between the buyer and seller of a property where key terms of the purchase are agreed upon.

In combination with the arras signing, the buyer also agrees to pay an initial reservation fee that is usually between 5-10% of the purchase price. Loosely translated as a “earnest money contract”.

 

What do you need to know before signing a 'contrato de arras' when buying a property in Spain?

Understanding the nuances of the "contrato de arras" is crucial for anyone looking to purchase property in Spain.

Read on to take part of five essential recommendations when negotiating and signing the arras, provided by Iván Bellod Díaz, Lawyer and Managing Director at Hoteland SRL, a Homevest partner.

1. Nature and Types of Contrato de Arras

Confirmatory Deposits:
These serve as a binding commitment from both parties, solidifying the intent to proceed with the transaction. If either party breaches the agreement, the other can demand enforcement or dissolution of the contract, along with compensation for damages. It's a strong legal commitment that leaves little room for backing out without consequences.

Penitential Deposits:
Unlike confirmatory deposits, these allow either party to back out of the deal without legal repercussions. If the buyer backs out, they forfeit the deposit; if the seller does, they must return double the deposit amount to the buyer. This flexibility can be both a benefit and a risk, depending on the circumstances.

2. Stipulated Amount and Its Importance

The contrato de arras must clearly specify the amount being given as a deposit. This sum typically ranges between 5% and 10% of the total property price and serves as a security for both parties. It's a tangible sign of commitment and a financial safeguard. Both parties must fully understand the repercussions of not proceeding with the purchase after signing, as the financial stakes can be significant.

3. Mortgage Conditions and Their Integration

 If the property purchase relies on securing a mortgage, this condition must be explicitly stated in the "contrato de arras." This clause ensures that if the buyer fails to secure the necessary financing, they can rescind the agreement without losing the deposit. It aligns the purchase agreement with the financial realities and provides an essential safety net for the buyer.

4. Timeline, Sale Conditions, and Their Detailing

 The agreement should meticulously specify the deadline for finalizing the sale and the conditions under which the sale will proceed. This includes details about the property's condition, what items are included in the purchase (furniture, appliances, etc.), and any other specific terms. If either party fails to meet the agreed-upon timeline, the deposit can be claimed. This section ensures that both parties have a clear understanding of what is expected and when.

5. Legal Advice and Its Importance

Given the complexity and potential implications of the "contrato de arras," seeking counsel from a lawyer specializing in Spanish real estate law is not just advisable but often essential. A legal professional can guide buyers through the intricate process, ensuring that all legal aspects are covered, rights are protected, and potential pitfalls are avoided. This investment in professional guidance can save time, money, and stress in the long run.

 

Summary

The "contrato de arras" is more than just a preliminary agreement; it's a pivotal tool in the Spanish property-buying process with unique characteristics that set it apart. Its uniqueness and lack of an English equivalent accentuate its importance, making it even more crucial for international buyers to be well-informed.

By exploring these five key areas and seeking professional advice, buyers can approach the Spanish real estate market with confidence and clarity, making the dream of owning a Spanish residence into a reality.

 

About Hoteland

Hoteland SRL is a Spanish law firm focusing on advising Spanish and foreign investors on everything related to real estate and property law, company formation and the intricacies of international tax law. Hoteland is Homevest’s exclusive legal and brokerage partner in Spain, expanding the platform's offering to also include legal services on-top of everything related to applying, comparing and finalising the mortgage with Spanish banks.

 

We recommend obtaining professional or specialist advice before taking or refraining from any action based on the content in this article. The information in this article does not constitute legal, tax, or other professional advice from Homevest Limited. Prior results do not guarantee a similar outcome. We make no representations, warranties, or guarantees, whether express or implied, that the content in this article is accurate, complete, or up to date.
 

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