The Arras Contract in Spain: What You Sign Before You Buy

Almost every property purchase in Spain passes through the same doorway: a private document, signed weeks before any notary is involved, in which the buyer hands over a meaningful sum — commonly around ten per cent of the price — and both sides promise to complete. It is called the contrato de arras, and for many international buyers in Tenerife and Fuerteventura it is the single most consequential paper of the whole purchase. It is also the one most often signed quickly, over a counter, without advice.

The paradox is that Spanish law attaches very different consequences to that document depending on a few words inside it. Here is what the arras contract really is, the three legal species it can belong to, and the clauses that decide whether your deposit comes back to you when life interferes.

What the arras contract is — and what it is not

An arras agreement is a private contract that already binds you to the sale. It normally fixes the price, the property, the completion deadline and the notary logistics; the deposit (arras or señal) is delivered as a sign of commitment and is deducted from the price at completion. Do not let the informality fool you: no notary is involved yet, but the obligations are real and enforceable.

It should not be confused with the «reserva» documents that agencies often ask buyers to sign, sometimes with a small payment, «to take the property off the market». Some of those reservation papers are genuine pre-contracts; others are vague on the essential points. Spanish case-law treats ambiguous deposit wording with suspicion — more on this below — which cuts both ways: the protection you assume you have may not be the protection you actually signed.

The three species of arras

Spanish practice and case-law distinguish three kinds of arras, and the label your contract earns decides what happens if someone walks away:

• Arras confirmatorias — the default. They simply confirm the contract and count as an advance on the price. Crucially, they do not buy anyone a right to walk away: if a party fails to complete, the other can demand performance or termination with damages under the general rules (article 1124 of the Civil Code), and the damages are not capped at the deposit.
• Arras penitenciales — the withdrawal kind, the one regulated in article 1454 of the Civil Code: if arras are agreed with this character, either side may lawfully pull out — the buyer by losing what was handed over, the seller by returning double. That is the famous rule most people have heard about.
• Arras penales — a penalty flavour: the deposit quantifies a sanction for breach, but without granting a free withdrawal right; the innocent party can still, in principle, insist on performance.

Now the part that surprises almost everyone. The Supreme Court reads article 1454 restrictively: the double-or-lose withdrawal regime applies only when the contract shows clearly and unequivocally that the parties wanted it. In case of doubt, courts classify the arras as confirmatorias. Phrases like «en concepto de señal» or «a cuenta del precio» are not enough — even a bare mention of article 1454 has been held insufficient when the withdrawal intent was not spelled out.

The practical consequence: many buyers believe they can abandon the purchase and «only» lose the deposit, when the paper they signed gives the seller the right to demand the full sale or damages beyond it. And many sellers believe the reverse. The species of your arras is not a formality — it is the heart of the document.

The financing clause: where foreign buyers lose deposits

The classic hard case: the buyer signs arras, applies for a mortgage, and the bank says no. Does the deposit come back?

Only if the contract says so. Spanish courts require the financing condition to be expressly agreed — a clause stating that the purchase is subject to the buyer obtaining a loan (usually specifying amount and deadline), and what happens to the arras if the loan is refused. Without that clause, the mortgage refusal is generally the buyer's problem, and the deposit is at risk.

And even with the clause, case-law expects diligence: a buyer who wants the deposit back must show a real effort to obtain finance — applying seriously and in time, not filing one half-hearted request with a single bank and giving up. Keep every application, email and refusal letter.

For non-resident buyers this clause matters double: approvals tend to take longer than residents expect, and banks typically finance a smaller share of the price. Build the reality into the deadline — a financing condition with an impossible calendar protects nobody.

What to check before you sign

The arras contract is signed at the moment of maximum enthusiasm and minimum information. Reverse that. Before any money moves:

• Nota simple from the Land Registry: who really owns the property, and what charges, mortgages or embargoes sit on it.
• All owners sign. If the property belongs to a married couple or several heirs, every owner (or a properly empowered representative) must sign the arras — a contract signed by one of three co-owners is a problem you do not want.
• Debts that travel with the property: IBI, community fees, and any special levies (derramas) approved by the community.
• Licences and paperwork appropriate to the property: first-occupancy licence or cédula, and for rural or older properties, the planning situation.
• The deadline and the notary: a completion date that fits your financing and paperwork reality, and clarity on who chooses the notary (by practice, the buyer).
• Who holds the money: the seller directly, the agency, or a lawyer's client account — and against what receipt.

When one side walks away

What happens next depends on the species:

• Penitenciales: the clean exit — buyer forfeits, or seller returns double. No need to prove damages; that certainty is exactly what the clause buys.
• Confirmatorias: no exit at all. The innocent party can sue for completion of the sale or for termination with damages under article 1124 — and the amounts in play can exceed the deposit in either direction.
• Missed deadlines: not every delay is a breach that triggers the drastic outcomes; contracts (and courts) distinguish deadlines that are essential from those that are not. If a date slips for reasons that can be documented — a bank's slow file, a registry certificate — take advice before declaring or accepting the contract dead.

If a dispute does arrive, the arras document itself is nearly always the battlefield: its wording decides the case more often than anything that happened afterwards.

Signing from abroad

Most of our buyers are not in Spain when the arras moment comes. Three practical points:

• You do not need to fly in. A power of attorney lets your lawyer sign the arras (and later the deed) for you; it can be granted before a Spanish notary, at a Spanish consulate, or before a foreign notary with an apostille and translation.
• NIE timing: the foreigner identification number is not legally required to sign a private arras contract, but you will need it for completion and the taxes that follow — and it can take weeks. Start it the moment you get serious.
• Money logistics: banks apply anti-money-laundering checks to incoming funds; proof of the origin of the deposit and the price should be prepared early, not the week of the notary appointment.

We looked at the buyer's tax and cost map in our guide to buying property in the Canaries; the arras stage is where that map first becomes binding.

A checklist before you hand over a euro

• Ask, in writing, which species of arras the draft contains — and if the answer is «standard», be worried.
• If you need a mortgage, insist on an express financing condition with a realistic deadline and a named consequence: arras returned.
• Order the nota simple and check owners, charges and debts before signing, not after.
• Confirm every owner signs, personally or by power of attorney.
• Fix a completion deadline you can actually meet from abroad — powers of attorney, NIE and bank checks included.
• Get clarity on who holds the deposit and against what receipt.
• Keep every message and document; if things go wrong, the paper trail is the case.

In an arras contract, the expensive words are the missing ones.

Our property team reviews and negotiates arras contracts for international buyers and sellers across Tenerife and Fuerteventura — in your language, before you sign. Read more about how we work in property law, or book a consultation at our Costa Adeje or Corralejo offices.

Common questions

How much is normally paid at the arras stage?

Custom, not law: around ten per cent of the price is the common figure, sometimes less for higher-value properties. The amount is negotiable — and so is everything else in the document.

If my mortgage is refused, do I get the deposit back?

Only if the contract contains an express financing condition saying so. Courts also expect you to prove you pursued the loan diligently — serious, timely applications, kept in writing. Without the clause, a refusal generally does not rescue the deposit.

The seller has changed their mind. Do they really have to pay me double?

Only under arras penitenciales, the article 1454 kind — and Spanish courts apply that regime restrictively, requiring clear and unequivocal wording. If your arras are confirmatorias, the route is different: demanding completion of the sale or termination with damages under the general rules.

Is the agency's «reserva» document the same as an arras contract?

Not necessarily. Some reservation documents are genuine pre-contracts; others are ambiguous about the essential terms and about what happens to the payment. Ambiguity is dangerous in both directions — have the text reviewed before signing, however small the amount.

Do I need my NIE before signing the arras?

No — a private arras contract can be signed without it. You will need the NIE for the deed and the taxes, and it can take weeks to obtain, so apply as soon as the purchase turns serious.

This article is general information about Spanish law as it stands at the date of publication, not legal advice for your specific situation. The wording of your own contract decides your position — have it reviewed before you sign.