If you are considering buying or selling a property in Spain, there is a fundamental document you must be familiar with: the “Contrato de Arras“. It is incredibly important to understand it well as it formalizes the initial commitment in property sales. Think of it as the key document that helps you secure the property you like and establish the initial terms of the agreement between the buyer and the seller. It is an essential step to ensure a smooth transaction within the realm of Spanish real estate law.
¿What is the Arras Contract?
The Arras Contract is a private agreement signed before the formal Public Deed of Sale (Escritura de Compraventa). Its primary purpose is to formalize the intention of both parties to complete the real estate transaction and to establish the terms under which the buyer pas a deposit (the “arras”) to the seller. It serves as proof of commitment and a guarantee against a possible breach of contract.
Types of Arras
Spanish law recognizes different types of arras, each with distinct legal implications regarding the consequences of withdrawal or breach:
1. Arras Penitenciales (Withdrawal Arras)
This is perhaps the most common type in Spanish property transactions. As defined by Article 1454 of the Spanish Civil Code, these arras allow either the buyer or the seller to withdraw from the agreement:
If the buyer withdraws, they lose the deposit paid.
If the seller withdraws, they must return double the amount of the deposit received.
Crucially, for arras penitenciales to appy, it must be explicitly stated in the contract that the parties have the right to withdraw under these specific conditions.
2. Arras Confirmatorias (Confirmation Arras)
These arras serve as a confirmation of the contract´s existence and the parties´commitment to fulfill it. The deposit paid is considered part of the total purchase price:
If either party breaches the contract, the non-breaching party cannot simply withdraw and keep/double the deposit. Instead, they must pursue legal action to demand specific performance (forcing the completion of the sale) or seed damages for the breach, with the deposit being considered a down payment towards the price or damages.
3. Arras Penales (Penalty Arras)
Similar to a penalty clause, these arras establish a pre-agreed penalty for breach of contract. The amount of the deposit acts as compensation for the breach:
If the buyer breaches, they lose the deposit.
If the seller breaches, they must return the deposit and potentially pay an additional penalty amount specified in the contract (often equal to the deposit, but it can be different).
Unlike arras penitenciales, arras penales do not automatically grant the right to withdraw; the non-breaching party can still potentially demand specific performance in addition to claiming the penalty.
Key Elements of a Contrato de Arras
A well-drafted Contrato de Arras should clearly specify:
- The full identification of the buyer(s) and seller(s).
- A clear description of the property being sold (including its registration details).
- The agreed purchase price.
- The amount paid as arras (the deposit).
- Fundamentally the type of arras agreed upon (penitenciales, confirmatorias or penales) and the specific consequences of breach or withdrawal for each party.
- The deadline for signing the final Public Deed of Sale (Escritura de Compraventa).
- Any conditions precedent to the sale (e.g., obtaining a mortgage).
¿Is an Arras Contract Mandatory?
While the Contrato de Arras is very common in Spain, the truth is that it is not legally mandatory for a sale and purchase to be valid. The Spanish Civil Code allows a simple private purchase agreement, even without arras, to be binding on both parties.
However, it is highly recommended, which is why it is used so frequently. The arras contract provides a framework of security and flexibility that a simple private agreement does not offer in the same way. It allows the buyer time to, for example, secure financing (the mortgage) or carry out the necessary legal checks on the property (the “due diligence”).
If you decide not to enter into a Contrato de Arras and proceed directly to a “normal” private purchase agreement, the consequences of a breach are different. In that case, the non-breaching party would generally have to go to court to force the other party to fulfill the contract (demand specific performance) or claim damages, which can be a longer and more complicated process than simply keeping the arras or returning double, as is the case with arras penitenciales.
Therefore, although it is not a strict legal obligation, the arras contract is a very useful and practical tool that brings clarity and security to the real estate transaction.
Visit our full article if you want to know more about the purchasing process in Spain.
¿Why is Legal Advice Essential?
Given the difference between the types of arras and their significant implications, it is fundamental that both buyers and sellers seek expert legal advice before signing a Contrato de Arras. A qualified real estate lawyer can ensure the contract accurately reflects the parties’ intentions, clearly defines the type of arras, and protects their interests in case of unexpected circumstances or a possible breach of contract.
If you need help with the buying or selling process, at Mael Abogados we can help you complete a secure and successful real estate transaction.
