House hunting in Spain can be exciting and exhilarating, but it can also be confusing, particularly if you’ve never purchased Spanish property before. You’ll find that the property buying process in Spain is slightly different than in other countries, so before you sign your name on anything, you need to take a step back and ensure you fully understand what your next steps will be.
This is particularly true when it comes to signing the Contracto de Arras. The Contracto de Arras (or deposit contract in English) is an important legal document that finalises your agreement to purchase a property in Spain. The reason this document is so important is because it commits both the buyer and the seller to the purchase of the property, and formalises the initial deposit payment. Once you have signed the contractor de arras, you will be subject to hefty financial penalties if you change your mind and choose to withdraw from purchasing the property. The deposit paid at this stage is usually a significant sum of between five and 15% of the agreed sale price of the property: this sum can only be cashed by the owner of the property being sold, so is usually transferred to them directly.
Here’s everything you need to know about the contracto de arras, including its purpose, what’s included, and when you should sign it:
Why is the Deposit Contract Used?
The purpose of the deposit contract is to provide peace of mind to all parties that the property sale will go ahead. It outlines, in writing, all the terms that have been agreed by all parties and ensures that these terms are met and respected. A contract de arras is only used for the sale of a property: the contracts used for rental agreements are different.
As a buyer, if you pull out of a property purchase once you have signed the contract de arras then you will lose the deposit that you have paid. However, if you reason the sale doesn’t proceed as agreed is due to the seller then the seller will have to return double the deposit amount that you initially paid. These hefty financial penalties act as a strong deterrent to anyone getting cold feet and thinking of pulling out at a late stage!
What Information Does the Deposit Contract Include?
As well as detailing the amount of deposit that is due, the deposit contract will also include a huge amount of key information including personal details relating to your finances, tax and citizenship. The details of the legal team representing you will also be included.
In terms of the property you are purchasing, you can expect to see full details of the property, any charges or other relevant financial circumstances (including any debts and who will be liable for these). As you would expect, the price that you will pay (both as your deposit, and the final payment due) will be included within this document, as well as your repayment plan and other payment options for items such as a loan or mortgage (if you have used these to purchase the property).
The final important element included within the deposit contract is an agreed time limit within which the same must be completed. This is important to fully understand because, unless both parties agree and a new contract is drawn up, these dates and time scales cannot be renegotiated.
Can I Write My Own Deposit Contract?
A quick google search for Spanish Deposit Contracts will show you numerous templates and advice on how to complete this information yourself, but you are strongly advised to seek advice from a lawyer: they will be able to draw up these contracts for you, and ensure you are aware of exactly what you’re signing. Because the contracto de arras is such a signifcant, and legally binding, document, and the financial and legal ramifications of breaking it are so large, you should seek legal advice before you sign. Having a lawyer as an independent witness to your agreement will also provide you with an additional guarantee: this is particularly important if you are signing a contract written in a language that is not your native tongue.
What Else Should I Do Before I Sign the Deposit Contract?
If goes without saying, but before you sign the deposit contract, you should have thoroughly explored and inspected the property you want to buy: turn on light switches, check the heating works, look for leaks and damage. Buying blind is never a good idea!
You should also have obtained the nota simple for the property, which will detail the legal boundaries and other legal obligations of the property. Even if you have seen the nota simple before, many lawyers suggest getting a new one on the day you sign the deposit contract to ensure nothing has changed since you last reviewed the document.
As we have outlined at The Local before, getting the nota simple is also very important when buying property in Spain. Many lawyers suggest getting a nota simple on the same day as when you sign the arras, as the legal and financial conditions of the property or seller could have changed since you first saw it.
Are you in the process of moving to Spain or looking to make the right move to Spain for you? If you’re looking for estate agents in Southern Spain then why not get in touch ? Our locally based property experts are a font of local knowledge, and are perfectly placed to help you find the home of your dreams.