Understanding Spain’s Arras Contracts and Real Estate
Learn more about the role of an Arras Contract when purchasing real estate in Spain
What is an Arras?
Arras is the term frequently used for the deposit that the purchaser transfers to the seller when buying Spanish real estate. When buying real estate you may be asked to sign a private purchase agreement contract with the seller. This document establishes all the terms & conditions for completing the purchase. As part of the agreement, you are asked to deposit some funds and this is the Arras.
There are different types of Arras – Penal, Penitential and Confirmatory.
The most common is the Penitential Arras. Here either party can withdraw from the contract. So the buyer agrees to forfeit the deposit if they walk away from the purchase, if the seller pulls the sale, they will pay the buyer double their original deposit.
How does an Arras work?
Typically, the buyer will pay around 10% of the final price as a down payment. The exact percentage depends on the country and region, and both parties can negotiate a higher or lower percentage.
If a signed Arras Agreement is not fulfilled by the purchaser, the seller can claim the down payment. This occurs when the buyer refuses to sign the final contract.
This means the buyer must pay the seller 10% of the property’s value as compensation for withdrawing from the deal.
Conversely, if the seller fails to sign the final contract, the potential purchase has the right to receive double the original Arras down payment from the seller.
Here, the seller would pay the buyer 20% of the property’s value as a penalty for ending the agreement without a transaction.
Let us to do the work!
How can a lawyer help me?
Our lawyers have a deep understanding of what should be covered and omitted in an Arras contract. Lexidy’s Real Estate experts will ensure the appropriate clauses are used in all documentation to protect your best interests.
They will draft the content of this document. This contract is often as long as 20 pages, so our property lawyers will ensure that rights are protected throughout the document by applying painstaking attention to detail.
The team will negotiate with the other party to remove suspicious clauses or clarify unusual language. Many of our clients aren’t native English speakers, so we work to ensure that they don’t get lost in translation and aren’t taken advantage of.
It’s important to work with a lawyer because real estate deals are often conducted with strangers. Most contracts and deals proceed without issue, but it’s vital to verify your trust in the other party. Often, real estate agencies act in the interest of the seller, so having a lawyer by your side levels the playing field.
Spain has different rules for each of its autonomous communities, so different contracts might be needed in your region of interest.
Our Real Estate lawyers are here to prevent specific risks. These can include the property’s characteristics and issues with the documentation. Sometimes, contracts fall through and you may be entitled to compensation. By working with a lawyer from the start, they are familiar with your case and can help pursue settlements or litigation if the other party fails to meet their obligations.
¨Don’t get lost in translation. Buy Spanish real estate with confidence¨
– Real Estate Team
What are the requirements?
While there are no mandatory requirements to complete and finalise an Arras Agreement, it is vital that you carefully review all documentation with a Real Estate expert before signing any paperwork. These documents are essentially promissory contracts where both parties agree to specific rights and obligations that have financial consequences.
For example, if you encounter an issue after signing the Arras Agreement and withdraw from the purchase, you will lose the 10% down payment you made.
We recommend that the buyer awaits for the following documents to be verified for proceeding:
- Permanent Certificate or Simple Note
- Urban Land Register
- Property’s utilisation license
- Energy Certificate
What's the Process for an Arras?
- Gather the relevant documentation, which typically takes clients up to 15 days.
- Verify the viability of the property and the paperwork, such as the Arras. We suggest allocating up to 30 days for this.
- Draft the deed. We will spend up to ten days on this step, depending on the other party demands.
- Sign the contract. You can do this in absentia by granting a Real Estate expert “Power of Attorney”
What else do I need to know?
When buying a property in Spain, you must pay taxes and fees. Typically, there are as follows:
- Property transfer tax of 6% to 10% for an existing property. If the property is a new build, you would pay 10% VAT, or IVA, instead
- Notary costs, title deed tax and land registration fee of 1% to 2.5%
It’s also important to obtain an NIE, or foreign ID card, from the Spanish administration. This will allow you to open a bank account as well as set up utilities like electricity, internet and water.
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Frequently Asked Questions
In Spain, the contract is considered resolved and the buyer has the right to receive the 10% down payment.
The party who hasn’t signed must compensate the other party with the amount agreed in the Arras Agreement or CPCV.
However, if both parties are still interested in signing the contract, they can agree to proceed and forego compensation.
Usually, the parties agree to 30 months but it’s possible to include a time extension clause. However, it depends on the arranged agreement.