When buying property in Spain, one of the first legal documents you’ll encounter is the contrato de arras (earnest money contract). This preliminary agreement serves as a bridge between your initial interest in a property and the final signing of the deed before a notary.
A contrato de arras is a pre-sale agreement where the buyer delivers a deposit (señal) to the seller, establishing the essential terms of the future property purchase. This document reserves the property, sets the price, establishes a timeline for completing the transaction, and most importantly, defines what happens if either party fails to complete the sale.
The Spanish Civil Code recognizes broad freedom in contracts, which means the specific content and consequences of your arras contract matter significantly. Not all arras contracts produce the same legal effects, which is why understanding the three types is crucial.
The Three Types of Arras Contracts
Spanish law recognizes three distinct types of arras contracts, each with different legal implications:
- Arras Confirmatorias (Confirmatory Earnest Money)
Confirmatory arras reinforce the existence of a binding contract that both parties must fulfill. The deposit functions as a partial payment toward the total purchase price. If either party breaches the contract, the non-breaching party can demand either performance of the contract or cancellation, plus compensation for damages and interest, according to Article 1124 of the Spanish Civil Code.
This type doesn’t provide an automatic exit route by simply forfeiting or doubling the deposit. Instead, it creates a stronger obligation to complete the transaction.
- Arras Penitenciales (Penalty Earnest Money)
Penitencial arras are the most commonly used type in Spanish real estate transactions. Article 1454 of the Spanish Civil Code explicitly regulates this form, allowing either party to withdraw from the contract with predetermined financial consequences:
If the buyer withdraws, they forfeit the deposit entirely.
If the seller withdraws, they must return double the deposit amount.
This type provides a negotiated exit option, though not a free one. It’s particularly useful when both parties want a serious reservation but accept the possibility of backing out with a fixed economic consequence.
- Arras Penales (Penal Earnest Money)
Penal arras function as a penalty clause to reinforce contract performance. According to Article 1152 of the Spanish Civil Code, the penalty substitutes for compensation of damages and interest in case of breach, unless otherwise agreed. This type is less frequently used in residential property transactions.
Important Note on Contract Interpretation
If your arras contract doesn’t explicitly specify which type it is, Spanish courts will generally interpret it as arras confirmatorias. This is why clear, explicit drafting is essential—the difference between being able to withdraw by losing your deposit versus being legally obligated to complete the purchase depends entirely on how the contract is written.
What Should an Arras Contract Include?
A well-drafted contrato de arras should contain:
- Full identification of buyer and seller
- Complete property description (including cadastral reference)
- Total purchase price
- Deposit amount and payment method
- Type of arras explicitly stated
- Deadline for signing the final deed (escritura)
- Property encumbrances and possession status
- Distribution of transaction costs
- Specific clauses (such as mortgage financing conditions)
The Mortgage Financing Risk
One of the most problematic issues arises when buyers sign arras contracts without including a financing clause. If the bank denies your mortgage application and you haven’t included a suspensive condition in your contract, you may lose your deposit even though you can’t complete the purchase.
Always include a clear financing clause specifying the minimum loan amount, deadline for obtaining approval, and what documentation will prove a denial.
Understanding the contrato de arras is just one step in successfully purchasing Spanish real estate. Each type of arras serves different purposes, and choosing the right one depends on your specific situation, financing needs, and risk tolerance.
In our next post, we’ll dive deeper into arras penitenciales, the most popular type for property purchases, explaining exactly how they work and what you need to know before signing.
Need a contract template? If you’d like a model or draft (borrador) of a contrato de arras penitenciales, contact me at barbara@spainable.com and I will send it for free.
Spainable 