You want to buy an apartment in Spain and don’t know what types of deposit contracts there are? Once the documents have been checked and you want to start buying, you must first sign the deposit contract (contrato de arras).
The deposit contract is an agreement signed between the two parties to confirm the seller’s interest in selling the home and the buyer’s interest in purchasing it. Finally, both parties agree to settle the transaction under certain conditions. Although in practice the most common is the penitential deposit contract with fines, there are 3 different types of contracts:
- Penitential deposit contract: Under this deposit agreement, the buyer pays a portion of the total amount to the seller, which is then deducted from the final price of the property. The main feature of this deposit contract is that both parties can withdraw from the purchase or sale of the property. However, the breach of the contract has a number of consequences: if it is the buyer who breaks the contract, he loses the amount of money deposited as a deposit. If it is the seller, he must pay the buyer twice the amount of the deposit. The advantage of this contract is that a maximum risk is set, namely the loss of the deposit.
- Confirming Advance Payment: This deposit agreement serves to confirm the existence of the purchase agreement and the commitment of both parties. The confirming advance payment is a part of the total price that will be applied to the final price of the property. Normally this payment in Spain is between 5 – 10% of the purchase price. Unlike the contract with penal statutes, this contract can not be unilaterally revoked. That is, both the seller and the buyer can demand the purchase or sale of the property and even claim damages.
- Penal down payment: This type of contract is very similar to the contract with confirmatory prepayment. In this contract, the parties do not have the right to withdraw from the contract, since the deposit does not serve as compensation in case of non-performance. However, the parties agree on a penalty clause in case of breach of contract. For example, it specifies the period within which the purchase of an apartment in Spain must be completed; in the event of non-compliance, the penalty clause comes into play. However, this clause does not allow the cancellation of the contract, so both the seller and the buyer can demand the fulfillment of the contract.
It is advisable to have all contracts reviewed by professionals in the sector, as there are many clauses that can be added to protect both the seller and the buyer.
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