Reserve the property: the deposit contract​

Once you’ve found the ideal property and have reached an agreement with the seller on the price, the next step is usually signing the deposit contract (contrato de arras).

This document is used to reserve the property and binds both the buyer and the seller to complete the sale within a set period. Although it is not yet the public deed of sale, it has important legal consequences, so it should never be signed without understanding all its clauses.

What is the deposit agreement?

The earnest money contract (Contrato de Arras) is a private agreement through which both parties commit to carrying out the sale under the agreed terms.

It usually includes aspects like:.

• Identification of the buyer and the seller.
• Full description of the property.
• Total agreed price.
• Amount paid as a deposit.
• Payment method for the rest of the price.
• Deadline to sign the deed before a notary.
• Division of expenses and taxes.
• Consequences in case of breach.

The amount given as a deposit is usually subtracted from the final price of the property when the sale is finalized.

Types of earnest money contracts (Contrato de Arras)

Although there are several types, the two most common are the penitential deposit and the confirmatory deposit.

Penitential deposit (Arras penitenciales)

They are the most commonly used in the buying and selling of properties in Spain and are regulated by article 1454 of the Civil Code. 

They allow either party to back out of the contract, but with financial consequences:

1. If the buyer decides not to go through with the purchase, they lose the amount given as a deposit.
2. If it’s the seller who defaults, they must return double the amount received to the buyer.

This system offers a legal way out for both parties, though with a financial penalty.

Confirmatory deposits (Arras confirmatorias)

In this type of contract, the deposit given counts as an advance on the price and confirms that there’s a sales agreement.

If one of the parties fails to comply, the other can legally demand:

• The fulfillment of the contract.
• Or compensation for the damages caused.

Unlike with penitential deposits, here there is no option to back out simply by losing or returning double the deposit.

How much money is given as a deposit?

There isn’t a percentage set by law. The amount is freely negotiable between buyer and seller.

In practice, it’s most common to put down between 5% and 10% of the property price, with 10% being the most frequent percentage.

Example

If you buy a property for 250,000€, a 10% deposit would be:

• Housing price:  250.000€
• Deposit paid: 25.000 €

When the time comes to sign the public deed, that amount will be deducted from the outstanding payment.

In certain transactions, especially when the sale depends on specific circumstances or there is a specific agreement between the parties, a higher deposit, like 15% or 20%, can also be agreed upon.

What happens if one of the parties backs out?

The consequences will depend on the type of deposit you signed.

If they are penitential deposits

If the buyer backs out of the purchase: They lose the entire amount given as a deposit.

If the seller decides not to sell: They must return double the amount received.

For example, if the buyer gave 25,000 €, the seller would have to return 50,000 €.

If they are confirmatory deposits

Noncompliance may lead to a legal procedure in which the affected party requests:

• That they be forced to fulfill the contract.
• Or compensation for the damages suffered.

That’s why it’s essential to know exactly what type of deposit agreement you’re signing.

Things you should check before signing

Before handing over any amount of money, make sure the contract includes at least the following information:

• Complete details of the buyer and the seller.
• Exact description of the property.
• Cadastral reference and registry information.
• Total agreed price.
• Amount given as a deposit.
• Deadline to sign the public deed.
• Payment method for the remaining price.
• Distribution of taxes and expenses.
• Type of earnest money contract signed.
• Consequences in case of breach.
• Status of charges, mortgages, or liens, if any.

It’s also recommended that the contract includes any special conditions agreed upon by the parties, like carrying out certain repairs before the sale or making the deal conditional on getting a mortgage.

Don’t sign anything without checking it

The deposit contract has important legal and financial effects. Even though it might seem like a simple formality, signing it without reviewing its content can cause conflicts that are hard to resolve.

If you’re a foreigner or not familiar with Spanish law, the safest thing to do is have a specialized lawyer review the document before giving it to the seller. This professional can make sure the clauses are clear, fair, and that they properly protect your interests.

Never hand over cash without getting a receipt and avoid signing a deposit agreement if there are still doubts about the legal status of the property. A prior check of the documentation can prevent problems like hidden liens, foreclosures, or registry discrepancies that could delay or even stop the sale.