Buying a property in Spain is one of the most important financial and personal decisions for any international buyer. In this process, the Arras contract (or contrato de arras) plays a crucial role when purchasing a home in Spain. It serves as a preliminary sales agreement that formalizes the commitment between buyer and seller, sets the essential terms of the transaction, and protects both parties before the signing of the public deed at a notary.
Understanding exactly what an Arras contract is, how it works, and its legal implications as an earnest money contract in Spain is essential to avoid costly mistakes, minimize risks, and ensure a secure purchase—especially for foreign buyers acquiring property in Spain.
An Arras contract in Spain (also commonly referred to as an earnest money contract or deposit contract) is a private real estate sales agreement signed between the buyer and seller once both parties have agreed to move forward, but before the public deed is executed at a notary. Its main purpose is to reserve the property, take it off the market, and formally record the essential terms of the future sale through a binding agreement.
The Arras contract when buying a property in Spain outlines key aspects such as the agreed price, deadlines, payment methods, distribution of costs, consequences of non-compliance, and the obligations of each party. This type of document serves as a legal and financial guarantee that protects both buyer and seller, providing legal certainty throughout the transaction—a factor of vital importance for foreign buyers navigating the Spanish market.
Why the Arras Contract Is Crucial for Buying a Property in Spain
For
international buyers looking to purchase property in Spain, the
Arras contract is a vital step in the real estate transaction process. This agreement allows the buyer to
secure the deal while completing essential steps such as obtaining a
Spanish NIE number, arranging financing or a mortgage, verifying the
property’s registration status, checking for liens or debts, and preparing all documentation needed for the signing of the public deed.
Additionally, the
Arras contract (earnest money contract) when buying a home in Spain provides a period of legal security during which buyers can conduct all necessary legal and financial checks with confidence, reducing common risks and minimizing the chance of unpleasant surprises before the transaction is finalized.
Types of Arras Contract in Spain
Before signing an
Arras contract (earnest money contract) when buying a property in Spain, it is essential to understand the different types of contracts recognized by Spanish law, as each type carries very different legal and financial consequences for the buyer and seller.
Penitential Arras Contract (Arras Penitenciales)
The
penitential Arras contract is the most commonly used in real estate transactions in Spain. This type of
earnest money contract allows either party to
withdraw freely from the agreement, accepting a financial consequence: if the buyer withdraws, they forfeit the amount paid; if the seller breaches the contract, they must return
double the deposit. This approach provides flexibility and legal security, especially valued by foreign buyers.
Confirmatory Arras Contract (Arras Confirmatorias)
A
confirmatory Arras contract does not allow free withdrawal. It reinforces the final commitment to buy and sell, and in case of breach, may give rise to
legal claims to enforce the contract or claim compensation for damages, as the deposit is considered a down payment on the final price.
Penalty Arras Contract (Arras Penales)
The
penalty Arras contract includes an additional pre-agreed financial penalty for the party that breaches the agreement, without preventing the aggrieved party from taking legal action to enforce the
Arras contract or demand further compensation if they wish.
How the Deposit is Paid in an Arras Contract in Spain
The
payment of the deposit in an
Arras contract when buying a property in Spain can be made in different ways, but it must always be clearly recorded in the contract to protect both the foreign buyer and the seller.
| Payment Method |
Description and Benefits |
| Bank Transfer |
The most common and secure method for an Arras contract. Provides proof of payment and ensures traceability of the funds. |
| Bank Cheque |
Accepted in many transactions, but must always be delivered to the seller or their authorized representative with proof of receipt attached to the earnest money contract. |
| Cash |
Possible, but restricted by Spanish law for certain amounts. Less recommended for an Arras contract due to security risks and traceability issues. |
| Deposit in Notary or Escrow Account |
The funds are deposited in the account of a notary or lawyer, providing maximum legal security for the Arras contract, especially valued by foreign buyers. |
Regardless of the method used to pay the deposit, it is essential that the
Arras contract clearly specifies the following:
- The exact amount paid as part of the earnest money contract.
- The agreed payment method.
- The recipient of the funds (seller, notary, or lawyer).
- The deadlines and conditions related to refund or compensation in case of breach.
This ensures that the foreign buyer’s payment within the
Arras contract is properly recorded and protected, minimizing risks and guaranteeing that the transaction is conducted transparently and securely.
How Much Is Paid in an Arras Contract in Spain?
In an
Arras contract when buying a property in Spain, it is most common for the buyer to pay
10% of the total purchase price as a deposit. While the amount in an
earnest money contract can occasionally range between 5% and 15%, the 10% figure is the market standard. This amount is later deducted from the final price when the
public deed of sale is signed at a notary.
The exact amount of the
Arras contract deposit is not strictly set by Spanish law and can be negotiated between the parties based on the property value, market conditions, and specific terms of the transaction. For
foreign buyers, it is especially important that this percentage is clearly stated in the document, along with deadlines, the chosen payment method, and the specific legal consequences in case of breach.
When Is the Arras Contract Deposit Paid When Buying a Property in Spain?
The
Arras contract payment
when purchasing a property in Spain is made at the moment the agreement is signed between buyer and seller. This payment acts as a
deposit or signal that confirms the buyer’s intent and reserves the property while legal and financial procedures are completed.
For foreign buyers, it is important to consider the following regarding the
earnest money contract:
| Aspect |
Description |
| Timing of Payment |
Usually paid at the exact moment of signing the Arras contract, either via bank transfer or bank cheque. |
| Payment Conditions |
The Arras contract must clearly state the exact amount, the method of payment, and the recipient of the funds. |
| Legal Security |
Keeping proof of payment for the earnest money contract reduces risks and protects the foreign buyer from potential disputes. |
| Relation to the Public Deed |
The amount paid within the Arras contract is deducted from the final purchase price when signing the public deed at the notary. |
The deposit for the
Arras contract is paid when signing the document, but its proper management and documentation are essential to ensure that your property purchase in Spain is safe and free of surprises.
Cancelling an Arras Contract: What Happens if One Party Backs Out?
One of the main purposes of the
Arras contract when buying a property in Spain is to clearly define the consequences if either party decides not to proceed with the transaction. These consequences depend on the type of
earnest money contract agreed, with
penitential Arras contracts being the most common in Spanish real estate practice.
If the Buyer Cancels the Arras Contract
In a
penitential Arras contract, if the buyer decides not to proceed with the purchase, they
forfeit the full amount paid as a deposit. This loss acts as compensation to the seller for the period during which the property has been off the market and the
earnest money contract was in effect.
If the Seller Cancels the Arras Contract
If the seller breaches the
Arras contract, they must return
double the amount received to the buyer. This penalty protects the buyer, especially
foreign buyers, against unjustified changes of mind once the
earnest money contract in Spain has been formalized.
Main Risks of the Arras Contract and Common Mistakes
Although the
Arras contract when buying a property in Spain is a highly effective tool to protect the transaction, poor drafting or insufficient review can lead to legal issues and significant financial losses, particularly for foreign buyers unfamiliar with the Spanish real estate system.
- Signing the Arras contract without checking the property’s registration status, including liens, mortgages, embargoes, or outstanding debts.
- Not setting clear and realistic deadlines within the earnest money contract for signing the public deed and fulfilling agreed conditions.
- Failing to specify what happens if financing or a mortgage is not approved, which could result in the loss of the deposit paid in the Arras contract.
- Using ambiguous, incomplete, or generic contract templates that do not accurately reflect the specifics of the Arras contract in Spain.
- Not detailing the allocation of expenses and taxes associated with the earnest money contract and the final purchase.
- Not obtaining specialized legal advice before signing the Arras contract to ensure all clauses are fair and legally binding.
Key Aspects Foreign Buyers Should Review in an Arras Contract
Before signing an
Arras contract when buying a property in Spain, foreign buyers should conduct a thorough review of the transaction to ensure the purchase is safe, legal, and free of hidden risks.
- Property registration status: Before formalizing the Arras contract, verify with the Land Registry (Nota Simple) that the property is correctly registered and free of liens.
- Existence of mortgages, embargoes, or outstanding debts: Check for any financial obligations that must be cancelled before or during the earnest money contract period.
- Taxes associated with buying property in Spain: Understand ITP or VAT, notary fees, registration, and administrative costs linked to the Arras contract and final sale.
- Financing or mortgage conditions: Specify in the Arras contract a “subject to financing” clause to protect your deposit if the bank does not approve the mortgage.
- Deadlines for signing the public deed at a notary: Set clear and realistic dates within the earnest money contract to avoid conflicts or unintended breaches.
- Verification of urban planning and cadastral legality of the property before committing to the Arras contract.
- Professional review of the Arras contract by a Spanish real estate lawyer to ensure your interests are fully protected as a foreign buyer.
Step-by-Step Process of an Arras Contract in Spain
The
Arras contract when buying a property in Spain is part of a structured process that protects both the foreign buyer and the seller. The following are the essential steps to carry out the transaction safely:
Negotiation of Terms
The buyer and seller agree on the price, the specific type of
Arras contract (usually penitential), deadlines, payment method, and any special conditions. For international buyers, it is highly recommended to have professional legal advice during this phase.
Drafting the Arras Contract
The
earnest money contract is prepared in writing, reflecting all agreed details. It must include clear clauses regarding withdrawal, consequences of breach, and tax obligations to ensure legal certainty for both parties.
Payment of the Deposit in the Arras Contract
The buyer delivers the agreed funds as a deposit for the
Arras contract (usually 10% of the purchase price). This amount acts as a formal guarantee and will be deducted from the final price when the sale is completed.
Legal and Financial Checks
During the validity of the
earnest money contract, the buyer verifies the property’s registration status, existing liens, and outstanding debts, while completing all banking procedures necessary to obtain financing or a mortgage.
Signing the Public Deed at a Notary
Once all conditions and checks established in the
Arras contract have been met, the public deed is signed at the notary, legally transferring ownership and completing the property purchase in Spain.
Required Documentation to Sign an Arras Contract in Spain
Before signing an
Arras contract when buying a property in Spain, it is essential that the foreign buyer gathers all necessary documentation to ensure the transaction is legal and secure.
- Identification document or passport: Required to identify both the buyer and the seller within the earnest money contract.
- NIE (Foreigner Identification Number): Mandatory for any foreigner wishing to formalize an Arras contract and purchase property in Spain.
- Simple registry extract (Nota Simple) from the Land Registry: Certifies property ownership, potential liens, mortgages, or embargoes before signing the Arras contract.
- Full property details: Address, cadastral reference, and essential features of the property to be included in the earnest money contract.
- Payment terms: Amount of the deposit, method of payment, deadlines, and any special conditions agreed by both parties for the Arras contract.
- Additional certificates and documents: Such as the energy performance certificate (C EE), previous deeds, community statutes if applicable, and any relevant urban planning permits.
Having all this documentation ensures a
secure Arras contract, reduces risks, and allows the foreign buyer to proceed confidently toward signing the public deed at the notary.
Having a
lawyer specialized in real estate transactions in Spain is essential for any foreign buyer who wants to sign an
Arras contract safely and with peace of mind. A professional review protects your rights and ensures the transaction complies with Spanish law.
Importance of a Lawyer in Reviewing the Arras Contract
- Legal security: A lawyer ensures that all clauses in the Arras contract comply with Spanish law and protect your interests.
- Risk prevention: Identifies potential errors, ambiguities, or unfavorable conditions in the earnest money contract that could cause legal problems or financial losses.
- Clarity of obligations: Ensures that the responsibilities of buyer and seller, as well as the consequences of a potential breach of the Arras contract, are clearly defined.
- Personalized advice: Explains each point of the document, particularly useful for foreign buyers who may not be familiar with Spanish legal terminology related to the earnest money contract in Spain.
Benefits of Hiring Our Real Estate Lawyers
- Experience with international transactions: We understand the legal and tax aspects affecting foreign buyers signing an Arras contract.
- Comprehensive review of the Arras contract: We ensure all clauses are clear, complete, and balanced to avoid future disputes.
- Management of legal documentation: We verify property registration, liens, mortgages, and other essential aspects before you sign any earnest money contract.
- Peace of mind and security: Minimizes risks and prevents unpleasant surprises during the property purchase process in Spain.
In short, a
lawyer specialized in Arras contracts not only protects your investment but also provides confidence and clarity throughout the process, especially for foreign buyers seeking to acquire property in Spain safely and without complications.
He optimizado la sección final de tu contenido, integrando la palabra clave Arras contract de manera estratégica en las preguntas frecuentes, la conclusión y el esquema de datos estructurados (JSON-LD) para maximizar tu relevancia en buscadores.
Aquí tienes la versión final:
Frequently Asked Questions About the Arras Contract for Foreign Buyers
Can I sign an Arras contract without being in Spain?
Yes, foreign buyers can sign an
Arras contract when buying a property in Spain even if they are not physically present in the country. This is done using a
power of attorney issued in their country of residence. This power must be legalized (Apostille of the Hague) and translated into Spanish to be legally valid for the
earnest money contract process.
Is it mandatory to hire a real estate lawyer for an Arras contract in Spain?
It is not mandatory, but it is highly recommended. A lawyer specialized in
Arras contracts can review the document, verify the property’s legal status, and ensure that all clauses protect the foreign buyer, significantly reducing financial risks.
Can the Arras contract be drafted in English?
Yes, it can be drafted in English for the buyer’s convenience, but the
legally binding version of the Arras contract must always be in Spanish. It is common practice to use a bilingual format where the Spanish version prevails in case of any discrepancy.
What happens if my mortgage is not approved after signing the Arras contract?
The
Arras contract can include a specific “mortgage contingency clause.” This protects the buyer if financing is denied, allowing for the cancellation of the
earnest money contract and the return of the deposit without penalty.
Can an Arras contract be cancelled once signed?
It depends on the type of
earnest money contract chosen. In
penitential Arras contracts, either party may withdraw by paying the penalty (losing the deposit or returning double). In confirmatory contracts, withdrawal is generally not permitted without facing potential legal action to enforce the sale.
The Importance of a Secure Arras Contract When Buying Property in Spain
Signing a well-drafted
Arras contract when buying a property in Spain is essential to protect your investment. For foreign buyers, this
earnest money contract not only provides peace of mind regarding the obligations of each party but also allows for a safe period to conduct legal and tax checks before the
signing of the public deed at a notary.
A
solid Arras contract helps avoid common mistakes and ensures that your property purchase proceeds without surprises. Seeking specialized legal advice to review your
Arras contract in Spain is the best guarantee for a safe and smooth real estate transaction.
