When you’re going to buy a property in Spain, there’s a word that you’ll hear many times, a keyword that you’ll have to learn and use many times in the entire purchase process.
This word is ARRAS.
Hello, I am Oscar Vaello, a lawyer at Vaello Legal, and today I am going to talk about what is perhaps the most important thing in a property purchase, the ARRAS CONTRACT.
What does ARRAS mean? Arras means “deposit”. It’s part of the price you give in advance to reserve that property and make sure that it’s taken off the market.
These deposits can be of two types:
1. “confirmatory”, which means that neither buyer nor seller can back out, or
2. “penalty”, which means that they can back out, but with a penalty.
In almost all contracts, the chosen type of arras is the “penalty” one.
If the buyer backs out, he loses the deposit, and if it’s the seller who backs out, he must return that amount doubled.
Let’s give an example, you’re going to buy a 200.000€ house, and you put down 20k as a deposit. If, before the completion of the sale, you change your mind and don’t wanna buy, you lose your 20k deposit. This amount would cover all the damages caused to the seller by the breach of contract, and he or she cannot claim anything else from you.
If the seller changes his mind and doesn’t want to sell you the property, he must pay you 40k, which is giving back to you the 20k you paid him, plus another 20k as a compensation.
If nothing is stated in the contract, the deposit is confirmatory, but almost always it is stipulated to be “penalty”.
And, how much is usually this deposit?
Normally the amount given as a deposit is 10% of the final price.
This amount is not written anywhere, no law says it has to be 10% exactly, but it’s a custom that has existed in Spain for many years.
If the seller tells you that you have to pay more than 10%, you should be suspicious. Ask for the reason, and additionally ask for something in exchange, such as more time to look for a mortgage.
It’s the same if it’s the other way round. If they ask for less, you should also be suspicious, and you should also ask why. It’s possible that they’re not totally committed to selling the property, or they want to back out easily if they receive a higher offer.
However, the arras contract is crucial, not only because of the amount that is given but also because it is where the most important things of the purchase are regulated.
If you don’t negotiate all these things correctly, it could cause you many problems, and above all cost a lot of money, and could prevent the sale from going ahead.
Things that should be stipulated in the Arras amongst many others are, for example:
· The period the buyer has to pay the rest of the price.
· The period the seller has to hand over the keys.
· What happens if the buyer doesn’t get their mortgage.
· The inventory of any furniture that will remain on the property.
· Who pays the agency fee.
· Any defects or issues that the property has, etc.
Usually, a friction point between the seller and the buyer is the time it takes between the signing of the arras contract and the final sale at the notary, as the seller usually wants to sell as soon as possible, and the buyer wants to have more time to look for a mortgage without pressure.
If you don’t need a mortgage and have the money waiting in a Spanish bank account, then you can afford to put a term of fewer than 2 months, otherwise, I recommend you that you try to get as much time as possible, ideally 4 months or more.
Now it’s time for you. How is it in your country? Do you also purchase with a similar contract? What is this contract called in your country? Is it also a 10% deposit?
If you have any doubts drop a comment here or send me an email to firstname.lastname@example.org
See you in the next video!