Deposit contract template (penitential arras) for a property sale in Spain

A deposit contract (contrato de arras) is the document buyer and seller sign once they have agreed on the property and the price but cannot yet go to the notary: the mortgage is pending, a charge must be cleared or paperwork gathered. The buyer pays an amount on account (the deposit) and both parties set a deadline to sign the deed. Note: under the Spanish Civil Code a sale is complete when buyer and seller agree on the thing and the price, even if neither has been delivered (article 1450 of the Civil Code). That is why a deposit contract is not just a letter of intent: what you write in it binds you.

A deposit contract is usually signed as a private document. The sale is then executed as a public deed, because the Civil Code requires acts that transfer rights in rem over real estate to be recorded in a public document (article 1280.1), and once there is agreement each party can require the other to complete that formality (article 1279).

The Civil Code only expressly regulates one function of arras, in article 1454: «If arras or a deposit have been given in the contract of sale, the contract may be rescinded by the buyer agreeing to forfeit them, or the seller to return them doubled». This is known as penitential arras: either party can walk away by paying that price. The other two types have no article of their own in the Civil Code; they derive from freedom of contract (article 1255) and the general rules on obligations.

• Confirmatory: a sign that the contract is closed and a payment on account of the price. They give no right to back out. If one party defaults, the other can demand performance or termination, with damages in either case (article 1124).
• Penitential: they allow withdrawal. A buyer who walks away forfeits what was paid; a seller who walks away returns double (article 1454). This is the template on this page.
• Penalty: they work as a penalty clause for breach. The penalty replaces damages unless otherwise agreed (article 1152), but does not allow a party to escape the contract by paying it unless that right was expressly reserved, and the injured party cannot demand both performance and the penalty unless clearly granted that right (article 1153).

The title of the document is not enough. For arras to work as penitential, the contract should state expressly and unambiguously that they are given as penitential arras under article 1454 and describe the consequences: the buyer forfeits them on withdrawal and the seller returns them doubled. If the wording is ambiguous or mixes concepts (for example, calling the arras «penitential» while also allowing performance to be enforced), a party wishing to withdraw risks them being interpreted differently. The template above cites the article and explains the consequences in the same clause.

If the property is in Catalonia, article 621-8 of the Catalan Civil Code applies, and it says three important things. First: money paid by the buyer to the seller is deemed to be confirmatory arras, as a sign of completion and on account of the price. Second: penitential arras must be expressly agreed; if the buyer withdraws they forfeit them, unless the withdrawal is justified under article 621-49, and if the seller withdraws they must return them doubled. Third: in sales of real estate, penitential arras agreed for a maximum of six months and deposited with a notary can be recorded at the Land Registry, and the property is then charged with their return. The template on this page changes the clause when you choose Catalonia.

With penitential arras, if the buyer withdraws they lose what they paid and the seller keeps it. If the seller withdraws, they return the deposit doubled: what was received plus the same amount again. If you paid €20,000, you get €40,000 back. With that, the contract ends for both. Always give notice of withdrawal in writing, by a means that leaves a record, before the deadline for the deed.

A buyer failing to obtain a mortgage does not, by itself, save them from losing the deposit. If the purchase depends on financing, agree an express condition with amount and date, like the one you can turn on in the template, and keep any refusals in writing.

The Civil Code sets no maximum period between the deposit contract and the deed, nor any percentage for the deposit: the parties decide. Set a specific date, allow for the time the bank really needs and agree any extension in writing. As for costs, unless otherwise agreed, the costs of executing the deed are borne by the seller and those of the first copy and after the sale by the buyer (article 1455). Taxes are paid by whoever their legislation determines; ask your adviser or the notary which ones apply to your transaction.

• Recent Land Registry extract: owner, charges, attachments and restrictions.
• That all owners sign, or someone with sufficient power of attorney, with their marital status in order.
• Latest property tax (IBI) and community fee receipts, and whether special levies have been approved.
• Whether there are tenants or occupants and when the property will be vacant.
• Pay the deposit by identified bank transfer, never in cash without a receipt.
• If an agency is involved, check the listing agreement is signed and that it is clear who holds the deposit until the deed. In Catalonia, agents must hold a guarantee covering the amounts they receive (article 55.3.c of Act 18/2007).

This template is for a straightforward sale between private individuals. Consult a lawyer, or the notary who will execute the deed, before signing the deposit contract if the property comes from an estate not yet accepted, there are several owners or minors, it has charges not cleared from the price, it is let or occupied, it is subsidised housing, the seller is a company or developer, or the deal depends on selling another home first. And whenever you do not understand a clause.