Arras contract in Spain: types, who it protects and mistakes to avoid

The contrato de arras (the deposit contract signed before the deed) is one of the most widely used documents in the Spanish property market and, paradoxically, one of the most misunderstood. Many buyers sign an arras pre-contract without understanding which type they are signing, what the consequences of breaching it are or what protection they have if the seller breaches it. That lack of understanding can cost a lot of money.

This guide explains the three types of arras recognised in the Spanish Civil Code (Código Civil, CC), their practical consequences and the critical points to check before signing.

The three types of arras: confirmatorias, penales and penitenciales

1. Arras penitenciales (art. 1454 CC): the most common, and the ones most people want to sign

Arras penitenciales (a deposit that lets either party pull out at a set price) are the most common type in the Spanish property market. Their effect is clear: if the buyer pulls out of the purchase, they lose the deposit they paid. If the seller pulls out of the sale, they must pay the buyer double the deposit received (double the arras, not just a refund).

They are the preferred type because they give both parties the option of withdrawing from the contract with a financial penalty, without anyone having to be forced to complete through the courts. For the buyer, they offer protection against a seller who receives a better offer: if the seller prefers to sell to someone else, they have to pay double the arras. For the seller, they protect against a buyer who ultimately fails to get financing or changes their mind.

The critical requirement: For an arras contract to be penitencial under art. 1454 CC, it has to state expressly that its effects are those of the arras penitenciales of article 1454 of the Civil Code. If it doesn't say so expressly, by default it may be interpreted as arras confirmatorias or penales, with very different effects.

2. Arras confirmatorias: the ones that give no right to withdraw

With arras confirmatorias (a deposit that simply confirms the deal), the amount paid is just an advance on account of the purchase price. If either party breaches, the other has no automatic right to keep the deposit or demand double: they have to turn to the general contractual remedies (demanding performance through the courts or compensation for damages). There is no clear, predetermined financial penalty.

They are less useful for the buyer because they don't guarantee a quick and effective penalty for a seller who sells to someone else. If the seller breaches, the buyer would have to sue and prove the damage, which is slower and more expensive than the double arras of art. 1454.

3. Arras penales: the reinforced variant

Arras penales (a deposit that also works as a penalty clause) are an intermediate type: they serve as an advance on the price but also as a predetermined penalty clause. If the buyer breaches, they lose the deposit. If the seller breaches, they pay back double. But unlike arras penitenciales, they don't necessarily give a right to withdraw freely: the penalty works as a liquidated damages clause, not as the price of withdrawing. They are less common in practice, but they are used in deals where the parties want to reinforce the commitment to complete.

The usual amount of arras in Spain: how big a deposit is reasonable

There is no legal obligation to use a particular percentage, but the standard in the Spanish market for arras penitenciales is 10% of the agreed sale price. For a €150,000 purchase, standard arras would be €15,000. In deals where the seller wants a firmer commitment from the buyer (very tight markets with several interested parties), up to 15% may be asked for. In small deals or between private individuals, 5% is also common.

The deadline for the deed in the arras contract: the most critical point

The arras contract must set a deadline for formalising the sale in a public deed. That deadline is what determines when the arras contract expires and, therefore, when the penalties can be applied. An arras contract without an explicit deadline is problematic.

The usual deadline in Spain is 30 to 60 days for deals without financing, and 45 to 90 days when the buyer needs to arrange a mortgage. If the buyer doesn't get the mortgage within the deadline, they lose the arras (unless the contract contains a condición resolutoria, a clause that cancels the contract if the loan isn't granted, which is highly advisable to include).

Essential clauses that a well-drafted arras contract must contain

• Full identification of the parties (name, DNI/NIE/CIF: the Spanish ID card, the foreigner's identity number or the company tax code) and a declaration that the seller is the owner and has capacity to sell.
• Full description of the property (cadastral reference, registry description, status of charges according to an up-to-date nota simple, the Land Registry extract).
• Total agreed sale price and method of payment (including the arras as part of the price).
• Amount of the arras paid and type of arras (penitenciales, art. 1454 CC, explicitly).
• Deadline for the public deed.
• A condición resolutoria if the purchase depends on a mortgage being granted (if the bank doesn't grant the loan, the arras are returned with no penalty).
• Condition of the property at the time of the deed (free of occupants, up to date with the IBI, the annual local property tax, and with community fees).
• Who pays each cost (notary, Land Registry, ITP/IVA, that is, property transfer tax or VAT, and the gestoría, the agency that handles the paperwork).

Related resources: For the full due diligence process that comes before signing the arras (checking charges, the nota simple, the condition of the property), the due diligence checklist is the essential first step. For handling purchases in the context of court auctions (where there are no arras, but a deposit and a bid instead), the court auctions guide explains the alternative process. For the tax on the sale that will be formalised after the arras, the article on ITP by region sets out the tax cost in each region.