The Arras Contract in Mallorca: A Complete Guide for International Property Buyers and Sellers
Buying a property in Mallorca is an exciting decision, whether you are looking for a permanent residence, a holiday home or an investment opportunity. However, before completing your purchase at the notary's office, there is one important document you need to understand: the Contrato de Arras, commonly referred to as the Spanish property deposit agreement.
For international buyers, the Spanish property purchasing process can be quite different from what they are used to in their home country. One of the most important differences concerns the moment at which both parties become contractually committed.
In Spain, signing an Contrato de Arras and transferring a deposit can create significant legal and financial obligations. Depending on the type of deposit agreed, withdrawing from the transaction could mean losing the money paid or having to return twice the amount received.
In Mallorca's international property market, where buyers and sellers come from different countries and legal backgrounds, understanding these conditions before signing is essential.
In this guide, I explain how the Spanish Contrato de Arras works, the different types of deposits, what happens if either party withdraws, and what you should check before committing to a property purchase in Mallorca.
1. What is an Arras Contract in Spain?
An Contrato de Arras is a private agreement between a property buyer and seller setting out the essential terms of their intended property transaction.
It normally involves the buyer paying an agreed deposit to the seller as a commitment towards the purchase price.
The deposit is usually deducted from the final purchase price when the public deed of sale (Escritura Pública de Compraventa) is signed before a Spanish notary.
The agreement typically includes:
Full identification of the buyer and seller.
A detailed description of the property.
The agreed purchase price.
The amount paid as a deposit.
The deadline for completing the transaction.
The agreed payment arrangements.
The conditions under which the property will be transferred.
Any existing charges or encumbrances.
The consequences of withdrawal or breach of contract.
An important point for international buyers: an Contrato de Arras is not simply a reservation agreement.
Under Spanish law, a property sale may already be legally binding once the parties have reached agreement on the property and the price, even before the public deed is signed.
This is why the wording of the contract and the legal nature of the deposit matter so much.
2. The Three Types of Arras in Spanish Property Transactions
Spanish law recognises three main types of contractual deposits:
Arras confirmatorias – confirmatory deposits.
Arras penales – penalty deposits.
Arras penitenciales – withdrawal deposits.
Although all three are commonly referred to as arras, their legal consequences are different.
A. Arras Confirmatorias – Confirmatory Deposits
Confirmatory deposits demonstrate that both parties have reached an agreement and intend to proceed with the purchase.
The amount paid is normally treated as an advance payment towards the purchase price.
What happens if one party fails to complete?
The deposit does not automatically give either party the right to withdraw simply by forfeiting the money or returning double.
If a contractual breach occurs, the affected party may rely on Article 1124 of the Spanish Civil Code and, depending on the circumstances, seek:
Fulfilment of the contract.
Termination of the agreement.
Compensation for proven damages and applicable interest.
In other words, confirmatory deposits do not automatically operate as an exit fee.
B. Arras Penales – Penalty Deposits
Penalty deposits are designed to reinforce the contractual obligations of the buyer and seller.
They establish a financial penalty if one of the parties fails to comply with the agreed terms.
The relevant provisions are Articles 1152, 1153 and 1154 of the Spanish Civil Code.
The precise consequences depend on how the penalty clause is drafted.
As a general rule, the agreed penalty replaces damages and interest unless the parties have agreed otherwise. However, it does not automatically give either party the right to walk away from the transaction.
This is an important distinction.
A penalty deposit is intended to secure contractual performance, not necessarily to provide a freely available right of withdrawal.
C. Arras Penitenciales – Withdrawal Deposits
This is one of the most commonly used arrangements in Spanish residential property transactions.
Arras penitenciales are governed by Article 1454 of the Spanish Civil Code.
The provision establishes that, where a deposit or earnest money has been agreed in a sale contract, the buyer may withdraw by forfeiting the deposit, while the seller may withdraw by returning twice the amount received.
In practical terms:
If the buyer withdraws, they lose the deposit.
If the seller withdraws, they must return double the deposit.
Example:
Imagine you agree to purchase a property in Mallorca for €450,000 and pay a 10% deposit of €45,000 under an appropriately drafted Contrato de Arras Penitenciales.
If you decide not to proceed, you may lose the €45,000 deposit.
If the seller decides not to proceed, they must return €90,000.
This arrangement provides both parties with a contractual right to withdraw, subject to the financial consequences established by law and the agreement.
Important: the legal nature of the deposit must be clear from the contract. Simply giving a document the title Contrato de Arras Penitenciales is not enough to guarantee that Article 1454 will apply.
The actual wording, the parties' intentions and the circumstances of the agreement are decisive.
3. What Happens if the Buyer Changes Their Mind?
This is one of the most common questions when buying property in Mallorca.
The answer depends on the type of deposit agreed and the specific contractual provisions.
If the parties have expressly agreed to penitential deposits, the buyer may withdraw by forfeiting the amount paid.
However, where the agreement contains confirmatory or penalty deposits, the buyer does not necessarily have the same freedom to withdraw.
Depending on the circumstances, the seller may be entitled to seek completion of the transaction or pursue the remedies available for contractual breach.
For this reason, buyers should never assume that paying a deposit automatically gives them the right to cancel the purchase.
Before signing, make sure you understand exactly what type of agreement you are entering into.
4. What Happens if the Seller Changes Their Mind?
A seller may also change their mind after receiving the buyer's deposit.
If the agreement contains properly established penitential deposits, the seller may withdraw by returning twice the amount received.
For example, if the seller has received €45,000, they would have to return €90,000.
However, there is an important distinction between exercising a contractual right of withdrawal and simply failing to comply with the agreement.
In the case of confirmatory or penalty deposits, the consequences must be assessed according to the contract and the general rules governing contractual obligations.
In certain circumstances, the buyer may be entitled to demand completion or seek termination and compensation.
The buyer's rights should therefore be assessed carefully rather than assuming that double repayment automatically applies in every situation.
5. What if Your Spanish Mortgage Application Is Rejected?
This is particularly important for international buyers, especially those purchasing a second home or investment property in Mallorca.
Imagine that you sign an Contrato de Arras, pay a deposit of €30,000 and subsequently discover that the Spanish bank will not approve your mortgage.
Can you recover your deposit?
Not automatically.
The fact that a bank refuses to grant a mortgage does not, by itself, give the buyer an automatic right to withdraw without financial consequences.
If the agreement does not include a suitable financing condition, the buyer may risk losing the deposit or facing further contractual claims, depending on the type of arras and the circumstances.
This is why I strongly recommend considering a specific mortgage approval clause before signing.
A properly drafted financing clause should address:
The minimum mortgage amount required.
The deadline for obtaining financing.
The buyer's obligation to apply for the mortgage in good faith.
The evidence required if the bank refuses the application.
The procedure for notifying the seller.
The circumstances in which the deposit will be returned.
For example, the parties may agree that if the buyer applies for a mortgage of an agreed amount and receives a formal rejection within the specified period, the contract can be terminated and the deposit returned, subject to the agreed conditions.
This is especially relevant for non-resident buyers, whose financing arrangements may involve additional documentation and different lending criteria.
My advice: if your purchase depends on obtaining a mortgage, do not sign an unconditional deposit agreement without first discussing how a potential refusal will be handled.
6. How Much Deposit Should You Pay?
In Spain, deposits of between 5% and 10% of the agreed purchase price are common in residential property transactions.
However, there is no general legal requirement to pay a fixed percentage.
The amount is negotiated between the buyer and seller and should reflect the circumstances of the transaction.
Here are some examples:
Property price | 5% deposit | 10% deposit |
€250,000 | €12,500 | €25,000 |
€350,000 | €17,500 | €35,000 |
€450,000 | €22,500 | €45,000 |
€600,000 | €30,000 | €60,000 |
€800,000 | €40,000 | €80,000 |
The deposit is normally deducted from the purchase price at completion.
In Mallorca, where properties can command substantial prices, it is particularly important to consider the financial exposure involved in paying a significant deposit.
Make sure the agreement clearly identifies who receives the money, how it is held and under what conditions it will be transferred or returned.
7. What Should You Check Before Signing an Arras Contract in Mallorca?
This is one of the most important stages of the buying process.
Before committing to a property, I always recommend carrying out a thorough review of its legal, registry, planning and administrative situation.
A beautiful property is not necessarily a property without legal complications.
Here are some of the key documents and issues to investigate.
1. Land Registry Extract – Nota Simple
The Nota Simple is an official extract from the Spanish Land Registry.
It helps establish:
The registered owner of the property.
The legal description of the property.
Existing mortgages.
Registered charges and encumbrances.
Easements and other registered rights.
It is one of the first documents I recommend obtaining before signing.
2. Cadastral Information – Catastro
The Spanish Cadastre provides information about the property's location, surface area, buildings and cadastral reference.
The cadastral information should be compared with the Land Registry documentation and the actual physical condition of the property.
Discrepancies in surface areas, extensions, annexes or buildings should be investigated before proceeding.
3. Urban Planning and Building Legality
This is particularly important in Mallorca.
Properties may be located on urban land, rural land or areas subject to specific planning restrictions.
For rural properties (fincas rústicas), particular attention should be paid to:
The legal status of existing buildings.
Building permits and planning licences.
Extensions and alterations.
Planning restrictions.
Possible administrative enforcement proceedings.
The legal status of swimming pools, terraces and other structures.
Do not assume that every existing building or extension is automatically legal simply because it is physically present or appears in marketing photographs.
4. Energy Performance Certificate
Check that the required Energy Performance Certificate (Certificado de Eficiencia Energética) is available and valid where applicable.
5. Habitation Certificate – Cédula de Habitabilidad
In the Balearic Islands, the relevant habitation and occupancy documentation should be checked in accordance with the property's characteristics and applicable regulations.
This is particularly important when purchasing older properties or homes that have undergone alterations.
6. Community of Owners – Comunidad de Propietarios
If the property is part of a residential community, request information about:
Outstanding community fees.
Approved special assessments (derrames).
Community regulations.
Planned maintenance works.
Any ongoing disputes affecting the property.
These matters can have a financial impact after completion.
7. Property Taxes and Utilities
Check the current situation regarding:
Annual property tax (IBI).
Local charges and municipal taxes.
Community fees.
Electricity and water accounts.
Any outstanding amounts associated with the property.
The contract should establish how outstanding payments will be settled.
8. Occupancy and Possession
It is essential to establish whether the property will be delivered vacant and free from tenants or other occupants.
The contract should also specify the agreed completion date, handover arrangements and the condition in which the property must be delivered.
My recommendation: never sign a deposit agreement based solely on photographs, a viewing or the seller's assurances. Proper due diligence should take place before you commit substantial funds.
8. How Long Should You Allow Between Signing Arras and Completion?
The period between signing the deposit agreement and completing the purchase before a notary is usually negotiated between the parties.
In many residential transactions, a period of 60 to 90 days is common, although the appropriate timeframe depends on the circumstances.
For international buyers, additional time may be required to organise:
A Spanish tax identification number (NIE).
Spanish bank accounts and payment arrangements.
Mortgage applications and approvals.
International bank transfers.
Corporate documentation, where applicable.
Powers of attorney.
Sworn translations and legalisation of foreign documents.
If you are purchasing remotely, a power of attorney may also allow an authorised representative to complete certain procedures on your behalf.
The contract should establish a clear completion deadline and explain whether extensions are possible.
If additional time is needed, any extension should be agreed in writing and signed by the relevant parties.
Never rely solely on verbal assurances when substantial sums of money are involved.
9. Common Mistakes to Avoid When Signing an Arras Contract
In my experience, many potential problems can be avoided by taking a little more time before signing.
These are some of the most common mistakes:
Signing without checking the property's documentation.
Always review the Land Registry information, planning situation and relevant certificates before committing to the purchase.
Not understanding the type of deposit.
Confirm whether the agreement contains confirmatory, penalty or penitential deposits and understand the legal consequences.
Ignoring mortgage conditions.
If your purchase depends on financing, discuss a mortgage approval clause before signing.
Agreeing to unrealistic completion deadlines.
International transactions can involve additional paperwork and bank procedures. Allow sufficient time.
Not identifying the property accurately.
The agreement should include the relevant Land Registry details and other information necessary to identify the property correctly.
Overlooking existing charges or occupants.
Make sure the contract establishes how mortgages, encumbrances, tenants and other relevant issues will be dealt with before completion.
Signing a document you do not fully understand.
If the agreement is written in Spanish and you are not fluent, obtain a complete translation and independent legal advice before signing.
A deposit agreement can involve tens of thousands of euros. Never sign simply because you are worried that another buyer might purchase the property first.
10. What Does Spanish Case Law Say About Arras Contracts?
The Spanish Supreme Court has repeatedly highlighted the importance of interpreting the actual content of a contract rather than relying solely on the title given to it.
A particularly relevant decision is Supreme Court Judgment 726/2025, dated 19 February 2025, which dealt with a property transaction involving penitential deposits and the interpretation of the parties' contractual agreement.
The judgment illustrates why it is important to make the legal consequences of the deposit clear in the contract.
Another relevant decision is Supreme Court Judgment 178/2026, dated 9 February 2026, which considered the consequences of a seller's conduct in a transaction involving penitential deposits.
These decisions reinforce an important practical lesson: the wording of the agreement, the obligations assumed and the actual conduct of the parties can all be relevant when determining the legal consequences of a failed transaction.
For this reason, a generic template downloaded from the internet should never be treated as a substitute for a properly prepared agreement.
11. My Advice as a Real Estate Advisor in Mallorca
Buying a property in Mallorca should be an exciting experience, not a source of unnecessary uncertainty.
However, the Spanish purchasing process has its own legal requirements, and international buyers should understand these before transferring a substantial deposit.
A well-prepared Contrato de Arras is much more than a document confirming the agreed price.
It establishes the obligations of both parties, sets the timetable for completion and determines what may happen if the transaction does not proceed as planned.
My advice is simple:
Before signing, make sure the property has been properly checked, understand the legal nature of the deposit, review the financing arrangements and ensure that every important agreement is reflected in writing.
In Mallorca's international property market, careful preparation can make all the difference.
If you are considering buying or selling a property in Mallorca and would like professional guidance throughout the process, I would be delighted to help.
Jorge Cifre
Real Estate Advisor in Mallorca
Brokered by eXp Realty
Website: www.jorgecifre.de
Disclaimer: This article is provided for general information purposes only and does not constitute legal, tax or financial advice. Spanish property transactions must be assessed individually, taking into account the specific contractual terms, the property's circumstances and the applicable legislation. Buyers and sellers should obtain independent legal advice before signing a property deposit agreement.
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