The ‘Arras’ Contract. June 2020.

A Property Buyer’s Guide to the ‘Arras’ Contract

The Arras is a ‘pre-purchase’ contract containing the important terms of a purchase agreement. Normally the real estate agent has an arras template. These are usually drafted in favor of the Seller. You can use them, but be sure to add clauses that protect yourself.

1) Deposit

a) The Buyer pays a 10% deposit when they sign. The amount is negotiable; 10% is the norm. If the Buyer fails to sign the deed for a reason attributable to the Buyer (found another property, etc.) they lose the 10%.

Mortgage Exception. If the Buyer’s mortgage application is denied, they can still get their arras money back. But this must be correctly written in the arras contract. If it’s not clear, the agent/seller might be able to keep your money. See below.

b) If the Seller fails to sell the property for a reason attributable to the Seller, they must pay back double the deposit or 20% of the purchase price.

2) Purpose

To bind both parties to the deal, reserve the property in the Buyer’s name and it forces the parties to write down the important terms of the deal before they proceed.

3) Before Signing

Due Diligence. The Buyer must thoroughly investigate the property before signing. Ask a lot of questions. The agent is under a very limited duty to disclose property defects. Some have a policy of ‘don’t ask, don’t tell’. You can get some documents online, but the agent/seller has most of them. If they refuse to turn them over, they might have something to hide.

4) Arras Contract Terms

Below is a summary of some terms. You can propose any term you want to protect yourself.

a) Penalty Clause. Seller: ‘The Seller will return double the deposit to the Buyer if the Seller fails to sign the deed for a reason attributable to the Seller.’ Likewise: ‘The Buyer loses the deposit if the Buyer fails to sign the deed for a reason attributable to the Buyer.’

In case no one is at fault: ‘The Seller will return the deposit if the deed cannot be signed for any reason beyond both parties’ control.’ This was used when a party couldn’t sign due to COVID-19. 

b) Property Repairs. Find out if the building has any past repairs unpaid or future repairs needed. If there are any signs of damage, get an architect’s inspection. Then write the damage details, and who pays to repair them, into the arras. Repairing buildings in Barcelona can be really expensive.

c) Your Mortgage. It’s best to have your mortgage approved before you sign. If not, write that you need a mortgage and quote the Catalan law that forces the seller to return the arras if your application is denied or you can’t get enough mortgage money to buy.

TIP: Don’t hire the agent, or their mortgage broker, for a mortgage. Their involvement could make it hard for you to get your arras money back in case you can’t get a mortgage. Keep your mortgage search totally private.

5) Who does the Buyer pay the Arras to?

a) Seller. This is best because if the deal falls through you only have to chase one party for your 10% or 20%. However, if you have evidence that the seller can’t be trusted or doesn’t pay his bills, go with the agent.

b) Agent. Some agents want the arras money so they can get paid right away (the seller pays them a % of the purchase price). Request to see their authorization to receive money on behalf of the seller. Then identify in the arras who you are paying and that both parties have to return their share of the arras doubled if the seller doesn’t sell. 

6) Deed-Signing Date. Finally, be sure to state a deadline to sign the deed. This forces the parties to resolve pending matters and will force the seller to move out in case he lives in the property.

Buying property in Spain can be a contact sport. What’s important is not to sign or pay anything unless you are completely protected.

For questions feel free to email [email protected] or call 664 665 365.

31 Comments on “The ‘Arras’ Contract. June 2020.”

  1. Hello, I am a Spain Advisors visitor. I’d like some info about contrato de arras.
    My husband and I are buying an apartment. We put his name on the contrato de arras since he might get his NIE first. Is it possible to add names later on the contract or title stating that we both paid and own it? Gracias!

    1. Yes, you can add your name to the deed when you sign it before the notary, then you will be a co-owner of the property. The arras is a private contract and the deed is a public contract. The deed is registered with the government land office (registro). The deed is what counts in terms of ownership.

  2. Good words of advice. How do you go about a seller not wanting to include a clause around the plusvalia tax being withold as the sellers are non-resident? They say that this is not applicable because they are selling for less than what they paid, and that therefore there will be no plusvalia to pay.

    1. Chelsea, When the seller is a non-Spanish resident a % of the plus valia (capital gains tax) he might owe to the local government is withheld from the purchase price. The buyer keeps it. Then the buyer pays it to the local Spanish tax authority in the seller’s name. This is a matter of law. Thus, it does not need to be in the arras. Be sure to tell either your mortgage bank before you sign the deed, or if there’s no mortgage, tell the notary when you sign the deed. They’ll calculate the seller’s plus valia tax. If it’s zero, the notary will instruct you on how to proceed. If it’s positive, the notary will ensure the money is withheld from the purchase price and instruct you on who and how to pay it.

  3. I am a bout to pay the arras tomorrow, set at 6% only (of an expensive apartment). However, the seller says the inspection of the building is only necessary on the outside of the building, the roof, the foundation. If there is anything wrong inside, say faulty electricity, this would be my own problem. Is that true?
    It did have the inside of the apartment inspected.
    Thanks

    1. Helen, Yes any damage or repairs needed to the inside of the building, or to the flat, are your responsibility. If repairs are required to the outside of the building they might also be your responsibility. Did your architect report any damage? I always talk to the building administrator to see if they can help. You should also ask for the ITE to see if any damage is documented therein. Agents and sellers have a very limited duty to reveal building damage. Generally, it’s the buyer’s job to uncover them. Best of luck.

  4. Good evening. I have signed the arras and paid a 20,000 euros deposit on a Barcelona property, and am scheduled to sign the escritura and get the keys on Friday – 3 days from now. In the past few days, however, there has been a leak from the property upstairs and damage has been caused to my future property. What to do? Do I wait until the damage is rectified before I sign and pay the final amount? If the damage is extensive and I decide to back out of the purchase, do I have a legal claim for the return of my 20,000€?

    1. You should immediately notify the owner. Then get an estimate of the damage and cost to repair and deduct it from the sales price. Check the arras contract to see if the owner promised to sell the property free of all damage, etc. YOu might have to delay the date to sign the escritura.

  5. Good evening! I’m selling my property and the buyer has put 10.000 euros down we should be signing next week! But now back in England I have changed my mind? Is it too late to pull out? The agent said she wants her fees of 4.000 euros and the buyer will see her lawyer!

    I gave back to agent the deposit of 10.000,
    1. The arras penalty I would give another 10.000 or 20.000?…? Or just another 10.000?.?.
    2. Take me to court and claim my property

    I feel that I don’t stand a chance and I will have to sell as no choice?.??

    1. Did you sign the arras contract already? Or you will sign it next week? Normally, once the seller signs the arras and accepts the deposit (10k€) they must sell the property or pay back double the arras. (I would need to read your arras to be sure). Regarding the agent, normally the seller pays the agent a % of the sale’s price. I would have to see your agreement with the agent to know if you have to pay them or not. Please feel free to send the agreements to me at [email protected]. Thanks.

      1. Good afternoon: the good news I didn’t sign the arras contract:

        But the agent has asked 4.000 euros for her work so far: my lawyer has said as the sale was not completed I don’t need to pay any fees?

  6. Hi, I am currently selling my apartment but the electricity requires reconnecting.The buyer wants to sign at the notary BEFORE the electricity has been reconnected. I am happy to pay all costs relating to reconnection. Is it possible to sell without electricity? I am concerned about taking a deposit in case it binds me to a specific date as reconnection may take some time. Gary

    1. Gary, As long as you have the original, unexpired, cédula de habilitat you can sell it without electrical connection.

  7. We were buying an apartment paid our 10% deposit and the full cost of the property in our laywers account four weeks to sign the seller has pulled out saying they are I’ll depressed they say but they called us saying that they would pay our 10% back but in our contract it states that they must pay 20% .

    1. Thanks for your comment. You paid the seller’s 10% of the purchase price and you paid your lawyers the full cost. How much was the 10%? Without knowing more, I would accept the 10% back from the sellers and forget about the other 10%. You would have to hire an attorney to sue the sellers for it an it would take at least a year to recover it. If it’s a reasonably small amount, forget it.

  8. Hello! We are just about to sign an arras on a property in Barcelona. Our mortgage is not finalised and they now want to delay the date of selling for two months. They still want us to sign the atrás now, but we are worried if we don’t get our mortgage then we lose all the money. We asked for a clause to say if we don’t get a mortgage then we get our deposit back but they refused. Is this normal ?!
    Thankyou
    A

  9. Ivan,

    Normally the buyer pays a 10% deposit with the arras. If you don’t buy you lose the 10%, so it’s the point of no return. If the seller does not sell, they must return double the 10%. So the seller must have that 20% available in case they decide not to sell you the property. The amount of the arras payment, however, can be 20%; 10% is not the law. But if you pay 20%, you should ask for something back from the seller since you’re paying more than the normal amount. And of course, be sure the seller has at least the amount you pay for the arras on hand in case the sale does not go through. So legally he can ‘use’ the arras money, just as long as he has it on hand in case the sale does not occur.

  10. Dear Mark ,
    My name is Ivan ,I am buying a commercial property in Barcelona, I am told by my solicitor, I need to pay 20% arras of the purchase price, and the seller can use that money even though the sell is still under process,it doesn’t sound right for me . In uk, we pay everything on the date exchange contract. I feel as buyer, my interest is not protected properly . Am I right ?
    Much appreciate it with your prompt answer when you can!
    Kind regards

    Ivan

    1. Ivan,

      Normally the buyer pays a 10% deposit with the arras. If you don’t buy you lose the 10%, so it’s the point of no return. If the seller does not sell, they must return double the 10%. So the seller must have that 20% available in case they decide not to sell you the property. The amount of the arras payment, however, can be 20%; 10% is not the law. But if you pay 20%, you should ask for something back from the seller since you’re paying more than the normal amount. And of course, be sure the seller has at least the amount you pay for the arras on hand in case the sale does not go through. So legally he can ‘use’ the arras money, just as long as he has it on hand in case the sale does not occur.

  11. Hi Mark,

    We have agreed to sign an Arras on a property.

    The seller is short on Money so needs our deposit to help bring the Nota simple up to date.The cadastre is up to date, but the nota simple needs an architect to add a pool and out building, which has been there for over 5 years.

    If they back out and we need the 20% returned, how does this work. My worry is as they are short of money, how can they afford to pay double back if something goes wrong?

    Thanks
    Paul

    1. Paul, To update the nota simple an architect prepares a report adding the structures. He gives it to a Notary Public who uses it to prepare an ‘Escritura de Obra Nueva’ or ‘Escritura de Modificación’. This escritura is filed with the Registro, who then issue an updated nota simple. Then you can buy the property. I’m doing a case like this now and it’s taking a long time. The seller, or someone, has to pay each party involved.

      If the seller backs out of the arras, they should return double of whatever you paid (normally 10% of the purchase price x 2 = 20%). If they don’t have 20%, at least try to get the 10% you paid. Otherwise you can sue them, get a judgment and place a lien on the property. You would need a Spanish lawyer for this.

      I would be careful paying this person 10% of the purchase price. You should also find out how long it will take before you can sign the final deed. Depending on the property, updating a nota simple can be a long process. Feel free to call or email if you have more questions.

  12. Pingback: How to Buy Property in Barcelona: A Guide for Foreigners - Spain Advisors

  13. Thanks Mark.

    This is what it says

    “That the Buyers have been informed in detail of the characteristics, state of conservation and dimensions of the property object of this contract and that is sold ´as seen´.”

    The spanish version says:

    “Que la parte compradora ha sido informada detalladamente de las características, estado de conservación y dimensiones del inmueble objeto de este contrato que se vende como ´cuerpo cierto´.”

    I don’t have your email but if you could please email me and will give you more details.

    Regards

    Gabriel
    I don’t have your email

  14. Good evening

    I am about to sign an Arras to buy a property in Spain. It has a term called “cuerpo cierto” which in the English version is stated as “sold as seen”. I am not familiar with this term. I am slightly concerned. In England seller of goods (not property) tend to use the term to absolve themselves of any responsibly.
    There is no survey but the building (built in 1985) looks fantastic no visible structural or otherwise defect and I am not concerned about periodical maintenance items.

    Thanks

    Kindly Regards

    Gabriel

    1. Gabriel,

      Cuerp Cierto has its own meaning in an Arras contract. I’d have to see the context before I can give an answer. Let me know if you can email it or give me a call: 664665365. Thanks, Mark

  15. Good afternoon, I have a friend wanting to pass on an apartment that he has bought off plan for €270,000 He had to pay 10% down plus VAT about 1 year ago and the remainder upon completion which will be over the next 2 to 3 weeks. He has not signed anything yet at the notary’s.

    He has decided to transfer the property on to another person with a €10,000 profit. We were told by the laywer of the buyer that there is a new law and that the buyer will now have to pay the 10% VAT as it is a new construction plus 8% transfer tax which seems extremely high and unfair to us as the first buyer never took possession of the property and it is just transferred onto another person.

    Can you please let me know if this is correct?

    I have just spoken to an accountant and he told me that there should be a separate invoice for the €10,000 profit and that he should pay 21% VAT on this invoice plus 10% on the purchase price which makes more sense to me.

    Thank you for your help.

    Best regards,

    1. Dear Ellen,

      Ellen,

      Thank you for your comment. These tax issues are tricky and must be dealt with properly. They arise frequently. To resolve them correctly I advise that you speak with a Spanish tax attorney (abogado fiscal). I share office space with one with experience in this area. His name is Raul Piñera at [email protected]. He charges 75€ for a one-hour consultation, to review your documents and provide advice. Let me know if your interested and I’ll schedule an appointment for you. Thanks again.

Leave a Reply

Your email address will not be published. Required fields are marked *