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You have spent months searching through listings, visiting potential homes under the Spanish sun, and finally, you have found 'the one.' Whether it is a sea-view apartment in Valencia or a finca in the Costa Blanca hinterland, the excitement is palpable. However, before you can claim the keys, there is a critical legal bridge to cross: the Contrato de Arras.
For international buyers, the distinction between a simple reservation fee and the formal Arras contract can be confusing. Yet, understanding this document is paramount. It is the point of no return where significant capital is committed, and legal obligations are solidified. This guide breaks down exactly what you are signing and how to ensure your investment is protected.
What is the Contrato de Arras?
The Contrato de Arras (Arras Contract) is a private legal agreement between the buyer and the seller. It acts as a prelude to the final public deed of sale (Escritura) signed before a Notary. While it is a private document, it is legally binding and sets the roadmap for the final transaction.
Its primary purpose is to reserve the property and establish the terms of the sale, including the final price, the deadline for signing, and the consequences of withdrawal. It typically involves the buyer paying a substantial deposit—usually 10% of the property price—which is deducted from the final amount due at completion.
The Three Types of Arras Contracts
Not all Arras contracts are created equal. Spanish law recognizes three distinct types, and knowing which one you are signing is vital for your financial safety. The specific wording in the document determines the classification.
1. Arras Penitenciales (Penitential Arras)
This is the most common format for real estate transactions in Spain and the one we generally recommend for international buyers. It is regulated by Article 1454 of the Spanish Civil Code. The key feature here is that it allows either party to withdraw from the contract legally, but with a specific financial penalty:
- If the buyer withdraws: They lose their deposit.
- If the seller withdraws: They must return the deposit doubled.
2. Arras Confirmatorias (Confirmatory Arras)
This version acts simply as a confirmation of the sale. The money paid is an advance. If one party backs out, the other can force them to complete the sale through the courts or sue for damages. It does not provide the clean 'exit strategy' of the Penitential Arras.
3. Arras Penales (Penal Arras)
Similar to the confirmatory type, but it establishes a specific fixed penalty for breach of contract. However, paying the penalty does not necessarily release the party from the obligation to buy or sell; the compliant party can still force the transaction.
Critical Clauses: What Must Be Included
Before you transfer 10% of the property value, your lawyer must review the draft. A robust Arras contract should be comprehensive to avoid ambiguity later. Ensure the following elements are present:
- Personal Details: Full identification of buyers and sellers (NIE numbers are essential here).
- Property Description: Exact address, registry details (Referencia Catastral), and confirmation that it is sold free of charges and encumbrances.
- Price Breakdown: The final agreed price, the amount paid as Arras, and the remaining balance.
- Method of Payment: How the final balance will be paid (usually bank draft at the Notary).
- Deadline: A fixed date by which the public deed (Escritura) must be signed. This is critical.
- Expense Distribution: Who pays for the notary, registry, and Plusvalía tax (according to law, or agreed differently).
Reservation Agreement vs. Arras Contract
It is common for buyers to confuse the initial 'Reservation Agreement' (Documento de Reserva) with the Arras. They are different steps in the ladder.
The Reservation Agreement usually involves a smaller fee (€3,000 to €6,000). Its sole purpose is to take the property off the market for a short period (e.g., 14 days) to allow your lawyer to conduct due diligence (checking the Nota Simple, urban legality, etc.).
Once due diligence is satisfactory, you move to the Arras Contract. This is where the 10% payment occurs. Never skip the due diligence phase to rush into the Arras; getting your deposit back after signing the Arras due to a legal issue can be difficult unless specific clauses were added.
The Financial Logistics
When signing the Arras, the payment is typically made via bank transfer. If you are an international buyer, you should already have opened a non-resident bank account in Spain or set up a currency exchange facility to handle this.
Who holds the money? In most cases, the money is transferred directly to the seller's account. However, if there are outstanding mortgages on the property that need to be cleared, or if the situation is complex, your lawyer may recommend holding the funds in a dedicated escrow account or the agency's client account, though this is less common in Spain than in the UK or US.
Conclusion: Sign with Confidence
The Arras contract is designed to protect both parties. For the seller, it confirms you are a serious buyer. For you, it locks in the price and prevents gazumping (where a seller accepts a higher offer at the last minute) without a significant financial penalty to the seller.
However, because the penalties for withdrawal are severe, you should never sign this document without professional legal representation. Your lawyer will ensure the property is legal, the debts are clear, and the contract is balanced.
Once the Arras is signed and the deposit paid, you can relax slightly. The deal is secured. The next step? Preparing for the Notary appointment and planning the champagne toast in your new Spanish home.
