Understanding the Spanish “Arras” Agreement in Real Estate Transactions
In Spain, real estate transactions often begin with a preliminary agreement known as an arras contract (contrato de arras). This agreement involves the buyer paying the seller a certain sum of money (known as arras) to demonstrate their commitment to purchasing the property. It serves as a mutual commitment to proceed with the sale under the agreed conditions.
Types of Arras Agreements
Arras agreements can vary depending on the situation. In Spain, three main types are recognized:
- Arras Confirmatorias – Confirmatory deposit agreements
- Arras Penales – Penal deposit agreements
- Arras Penitenciales – Conditional or “rescindable” deposit agreements
The most common arrangement is that if the buyer cancels the agreement, they forfeit the deposit. If the seller cancels, they must return double the deposit to the buyer.
Key Components of an Arras Agreement
An arras contract typically includes the following information:
- Parties involved – Buyer and seller details
- Property description – Full details of the property being sold
- Sale price – Agreed purchase amount
- Deposit amount – Usually a percentage of the total price (commonly 5–10%)
- Type of arras – Confirmatory, penal, or rescindable
- Completion date – The agreed date for signing the final deed
- Breach of contract terms – Conditions if either party fails to fulfill the agreement
- Date and signatures – Formalizing the agreement
When is an Arras Agreement Signed?
The arras agreement is usually signed in the early stages of a property purchase, after the buyer has inspected the property and both parties have agreed on the price and basic terms. Typically, it is signed 1–2 months before the final deed is executed before a notary.
Why is an Arras Agreement Important?
- Legal protection: Arras agreements ensure both parties are committed to the transaction and provide legal security.
- Encourages completion: Deposits act as an incentive for both parties to honor the agreement.
- Simplifies the transaction: By confirming the intent to proceed, it makes drafting the final deed easier.