In Spain, it is customary to pay 10% of the purchase price when signing the private sale agreement. This is the so-called 'arras'. In practice, this payment often leads to discussions. Therefore, in this article you will find more explanations about the options for paying the deposit.
The various agreements
In a regular purchase, there are three types of agreements. First, there is the reservation contract or option. With this agreement, you block the sale for a certain period of time. With reservation, you pay €3000 - €11000 depending on the purchase price.
Within the option period, checks are made on the property. For example, consider the ownership situation, debts and urban planning. Based on the result, the private purchase agreement is drawn up. This is the binding agreement by which you buy the property. At this point, you therefore pay the security deposit of 10%, which is deducted from the purchase price.
Finally, there is the notarised deed of sale.
How does the 10% payment process work in Spain?
In Belgium, we are used to the 10% down payment of the purchase price being blocked at a recognised real estate agent's office or at a notary. However, this is not common in Spain: here, people pay the 10% deposit directly into the seller's account. Should the sale not go ahead, the seller is entitled to keep this sum as compensation. However, if the seller cancels the sale, he must transfer 20% of the purchase price to you, the buyer.
The above course has some drawbacks. What if the seller acts in bad faith? Or what if he dies? The seller could also immediately use the funds to buy property himself or to repay a debt.
What are the alternatives?
Therefore, the simplest alternative is for the funds to be blocking on a third-party account. This can be our third-party account or the third-party account of the seller's law firm.
Should the seller not have a lawyer, or not agree to this solution, we can block the funds to the broker's account. However, a clause should then be inserted stating that the broker cannot simply pass these funds on to the seller or use them as remuneration for his services.
Another alternative is to block the funds on a notarial trust account. In Spain, a notary does not do this by default. The notary draws up a separate deed for this with the conditions to keep and release the funds. Often, the notary also charges a fee for this.
What if the seller insists on receiving the 10% payment in Spain to his own account?
As it is customary in Spain for the seller to receive the funds directly himself, this often leads to discussions. After all, as a buyer, you would prefer the 10% deposit to be blocked to by deed. However, the seller may insist on receiving the funds himself. We then recommend including a clause in the purchase agreement that you explicitly allows the purchase to be enforced in court (a so-called arras confirmatorias or arras penales).
In any case, it is important that there is no (theoretical) risk that the sale could not go through. Such a risk is, for example: a tenant is occupying the property and will have to leave before deed. The sale cannot then go ahead if the tenant is still living there at the time of deed.
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