Hello everyone, I’ve been house-hunting in Madrid recently and it’s been driving me crazy. I finally found a place I liked, and the agent immediately pushed me to pay a deposit and sign something called a Contrato de Arras. I was a bit confused at the time. If I pay this money and then my mortgage application is rejected, or if I discover some hidden problems with the property, is the money just gone? Since it’s a significant amount, I did some research on my own and wanted to share what I found. Hope it helps.
This Contrato de Arras, which you could roughly translate as a ‘deposit agreement’ or ‘preliminary purchase agreement,’ is a crucial document you sign before the final property purchase contract. Its core purpose is to set the terms for the deposit. And here’s the key part: the fate of this deposit completely depends on the specific clauses in the contract. There are three main types, which I’ve put into a simple table to make it easier to understand.
The Three Types of Arras Agreements
| Type | Buyer defaults | Seller defaults | Notes |
|---|
| Arras Penitenciales | Forfeits the entire deposit | Pays double the deposit in compensation | Most common, gives both parties the “right to back out” |
| Arras Confirmatorias | Can be sued for specific performance or damages | Can be sued for specific performance or damages | Confirms the sale; consequences of breach are determined by a court |
| Arras Penales | Pays the agreed-upon penalty | Pays the agreed-upon penalty | Acts as a penalty clause; specific performance can also be demanded |
How to Differentiate and Choose?
So, when it comes to the Spanish property deposit, whether you can get it back really depends on which type of agreement you sign! The Arras Penitenciales is the most common type found in real estate agency contracts today because it’s straightforward, giving both parties a chance to ‘pay to back out.’ For instance, when considering a property deposit refund, if you’re the buyer and you’ve signed this type of contract, you’ll lose the deposit if you decide not to proceed for any reason. Conversely, if the seller takes your deposit and then sells the property to someone else for a higher price, they must pay you back double.
A final reminder: before signing any document, always read the clauses carefully to confirm which type of Arras is specified in the contract. If it’s not explicitly stated, Spanish Supreme Court precedent tends to interpret it as Arras Confirmatorias, which can complicate matters and potentially lead to a lawsuit. Therefore, the safest approach is to spend a few hundred euros to have a lawyer review the contract for you. After all, a deposit of several thousand, or even tens of thousands, of euros is at stake!
