The "Contrato de arras" or deposit agreement in Spain
Everything you need to know about the "Contrato de arras" or deposit agreement in Spain
You've found the perfect house in Spain. One you know you want to buy. But before signing the contract, do your research on this country's legal process for buying property and securing your deposit agreement. You don't want to be left out of pocket or, worse, liable for any damages that might occur if something goes wrong later down the line! Here are all the questions you should be asking yourself:
- What is a deposit contract?
- What does the deposit contract do?
- Is it compulsory?
- What information is typically included in a deposit agreement?
Read on to find out more about these important documents so that when it comes time to sign on the dotted line, you'll feel confident knowing all there is to know about what could potentially become a very large sum of money.
What is a deposit contract?
A deposit contract (or 'Contrato de arras' as it's known in Spanish) is signed before the sale of a property and secures the buyer's offer. It's paid as a 'good faith' gesture and will be held in escrow by the notary until completion of the sale when it will be returned (minus any deductions). It often comes to between 10-15% of the agreed purchase price, but this can vary from region to region and is negotiable.
What does the deposit contract do?
Spain is a solid market for those looking to buy new property. There are many choices out there, and as such, some homeowners may find that their home takes longer than they anticipated to sell. A deposit contract or 'arras' in Spanish contracts ensures both parties have peace of mind throughout the sale process. As this agreement is legally binding, this should see your sale move through as smoothly as possible.
The Arras contract or deposit contract in Spain is designed to give buyers and sellers peace of mind. If the buyer decides to pull out of the sale after signing a deposit contract, they will lose their deposit. If the seller pulls out and does not sell the property as agreed in the contract, they must return double the amount paid as a deposit.
Is a deposit contract compulsory?
The answer is no. It isn't compulsory at all. You could say that the deposit contract serves as preparation for signing the purchase contract. But why not sign the purchase contract directly? Cancellation of previous charges, among other factors, might cause the signing of the deed of sale to be delayed. If both parties are satisfied with the price, term, and there are no other circumstances that would prevent the transaction from going through, no earlier agreement is necessary, and the deed of sale can be signed directly. But this is not always the case. Many circumstances can delay the signing of the deed of sale, cancellations of previous fees, ownership verifications, encumbrances, authorisations, licenses, financing application paperwork and even a pandemic. These are some of the various reasons that make the use of these prior agreements beneficial to buyers.
What is included in a Spanish deposit contract?
- Personal details: signing one of these properly drafted contracts will assure that all parties have the required documentation.
- Identification of the sold property.
- Charges, limitations or other relevant circumstances.
- Price for which the purchase and sale are fixed and the amount to be paid at the time of the deposit contract.
- The agreement must be completed within a certain period of time, usually 45 days to 60 days.
- Allocation of expenses, and that each party is aware of what they are signing, as this cannot be changed later unless there is a new contract between the parties.
- Other complications that may be relevant in each situation.