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The arras contract in Spain is the private agreement signed between buyer and seller before completion at the notary. The buyer pays a deposit, usually 10% of the price, and both parties commit to completing the sale by a set date. For foreign buyers it is often the most important document of the entire process, because it decides what happens to your money if something goes wrong.
What is an arras contract?
The *contrato de arras* is a private purchase agreement regulated by the Spanish Civil Code. It fixes the price, the payment schedule, the completion date and the conditions of the sale. It is normally signed a few weeks after the reservation agreement and several weeks before the public deed (*escritura*).
The three types of arras
Arras penitenciales (penitential deposit)
This is the most common type in Spain and is based on Article 1454 of the Civil Code. It allows either party to withdraw:
- If the buyer withdraws, they lose the deposit.
- If the seller withdraws, they must return double the deposit.
It gives flexibility, but also a clear price for walking away.
Arras confirmatorias (confirmatory deposit)
The deposit is treated as an advance payment of the price. Neither party can simply walk away by losing or doubling the deposit: the other side can demand completion or claim damages in court.
Arras penales (penalty deposit)
The deposit works as a penalty for breach, but the innocent party can still demand that the contract is fulfilled.
Many contracts do not state clearly which type applies. When the wording is ambiguous, Spanish courts tend to treat the deposit as confirmatory, which can create unexpected results. This is one reason why drafting matters.
Clauses a buyer should insist on
A well-drafted arras contract protects the buyer against the risks found in due diligence. Typical protective clauses include:
- Due diligence condition: the deposit is refundable if legal checks reveal planning irregularities, undisclosed charges or missing licences.
- Mortgage condition: if you need finance and the bank refuses, you recover the deposit.
- Free of charges and occupants: the seller must deliver the property free of mortgages, seizures, tenants and debts.
- Tax retention: if the seller is non-resident, 3% of the price will be withheld for the Spanish tax authorities.
- Inventory and condition: what furniture is included and the state in which the property must be delivered.
- Completion date and notary: a clear date and who chooses the notary.
- Payment method: how the deposit is held, ideally in a lawyer’s client account or escrow rather than paid directly to the seller.
Our real estate lawyers draft and negotiate these clauses for clients buying in Mallorca, Ibiza and the rest of Spain.
Reservation agreement versus arras contract
Estate agents often ask for a small reservation payment to take the property off the market. That document should be short, refundable if the arras contract is not signed, and never replace the full contract. Paying a large sum on the basis of a one-page reservation form is a common and costly mistake.
What happens if there is a dispute?
If one party fails to complete, the consequences depend on the type of arras and on the wording. Disputes over deposits are among the most frequent property claims in Spanish courts, and they are usually resolved by interpreting exactly what the contract says. Having the contract reviewed before signing is much cheaper than civil litigation afterwards.
Frequently asked questions
How much deposit is normal in Spain?
Usually 10% of the purchase price, although it can be negotiated.
Can the arras contract be in English?
It can be bilingual. It is advisable to have a Spanish version, as it may need to be presented to authorities or courts.
Do I need to be in Spain to sign?
No. It can be signed remotely or by your lawyer under a power of attorney.
Conclusion
The arras contract turns an agreement in principle into a legally binding commitment. Choosing the right type of deposit and including the right conditions is the best protection a buyer has. Castell.law reviews and negotiates arras contracts in English, German and Spanish before our clients transfer a single euro.
