The deposit contract (contrato de arras): what you should know before signing

Updated on 27 September 2026. The Civil Code rules on arras have not changed, but we have added the Supreme Court's 2025 and 2026 case law, your right to request information before paying the deposit, the attempt at negotiation required before suing (since 3 April 2025) and the tax treatment. We have also corrected what we said about Catalonia and about registering arras at the Land Registry.

When a buyer and a seller agree on a home, they can almost never sign the deed that same day. Time is needed to obtain the mortgage, sell another property, check the Land Registry or simply find a date at the notary's office. To give both parties security during that interval, they sign a deposit contract (contrato de arras).

It is a short and very common document, but it decides what happens to your money if the deal goes wrong. Here you will find the types of arras, what to check before paying the deposit, what to include in the contract, whether it can be registered and what to do if the other party does not perform.

What a deposit contract is and what it is for

It is an agreement, usually private, that the buyer and seller sign before the public deed of sale (escritura pública). It sets out the property, the price, the payment terms, the deadline for signing before a notary and the amount the buyer pays as a deposit (señal).

• For the buyer, it reserves the home: the seller undertakes not to sell it to anyone else. This is only a personal undertaking: with penitential arras the seller can pull out by paying you double, and it does not protect you against a third party who buys and registers first in good faith (explained below).
• For the seller, it is a safeguard against the buyer walking away without reason, because the contract provides for financial consequences if the buyer does not go ahead.

Some basic points:

• A notary is not required for it to be valid, although you can sign it before a notary if you want more certainty about the parties' identity and the date.
• The law does not set any amount. Around 10% of the price is common, but that is market practice, not an obligation.
• If the sale is completed, the deposit is deducted from the price.
• If the document already identifies the home and the price, there may be a binding sale from that moment (art. 1450 of the Civil Code, Código Civil or CC), and the deed would simply formalise it. That is why, unless penitential arras are agreed, nobody can freely back out.

The three types of arras: the wording decides everything

What matters is not the document's title but what its clauses say. There are three types.

Penitential or withdrawal arras (arras penitenciales)

These are the arras governed by article 1454 of the Civil Code: either party may withdraw without giving reasons. If the buyer withdraws, they lose the deposit; if the seller withdraws, they return it doubled. They do not secure the sale: they set in advance the price of backing out.

Because they are an exception to the rule that contracts must be performed, the Supreme Court (Tribunal Supremo) requires the intention to agree them to be clear and unequivocal; if in doubt, the arras are treated as confirmatory. Two recent Supreme Court judgments (cited as STS, sentencia del Tribunal Supremo) clarify their scope:

• STS 270/2025, of 19 February (ECLI:ES:TS:2025:726): if the contract expressly refers to art. 1454 and describes the loss of the deposit or its return doubled, the arras are penitential even if the deadline is later extended, the deposit increased or payments are described as "on account" of the price. Where the wording is clear, it prevails (art. 1281 CC). The buyer who failed to sign in time lost everything paid.
• STS 538/2026, of 9 April (ECLI:ES:TS:2026:1558): a developer that abandoned an off-plan development was entitled to withdraw from the reservations by returning double the deposit. For the Supreme Court, it was exercising an agreed right, not breaching the contract, and the clause was not unfair to the consumer buyers because it was symmetrical and transparent.

In practice: with penitential arras, if the seller receives a better offer they can pull out by paying you double the deposit, and you cannot force them to sell you the home.

Penalty arras (arras penales)

These are governed by the rules on penalty clauses (arts. 1152 to 1155 of the Civil Code). They reinforce performance with a financial penalty; they do not allow a party to leave the contract.

• Paying the penalty does not release a party from performing, unless the contract expressly reserves that right (art. 1153).
• The party that does perform may demand performance or the penalty, but not both, unless the contract clearly allows it (art. 1153).
• The penalty replaces damages, unless otherwise agreed (art. 1152).
• The judge only reduces the penalty if the obligation was performed in part or irregularly (art. 1154). If exactly the breach the clause was meant to penalise occurs, there is no reduction (STS 530/2016, of 13 September, sitting in plenary), although the Supreme Court leaves room to review extraordinarily disproportionate penalties.

Confirmatory arras (arras confirmatorias)

These are presumed when the contract does not clearly say otherwise. The deposit is a payment on account of the price and evidence that the contract exists.

Neither party can walk away unilaterally. If one party breaches, the other may choose, under article 1124 of the Civil Code, between demanding performance (signing the deed and paying the price) or terminating the contract, in both cases with compensation for the loss and damage it can prove, plus interest.

Quick comparison

If you are buying from a developer or a company

If the seller is a business and you are buying as a private individual, clauses you have not individually negotiated are subject to the unfair-terms test in the consolidated text of the General Law for the Protection of Consumers and Users (Ley General para la Defensa de los Consumidores y Usuarios).

Unfair terms include, among others, those that let the business keep what you have paid if you withdraw without providing for equivalent compensation if the business withdraws (art. 87.2), those that impose disproportionately high compensation on you if you breach (art. 85.6) and those that set compensation that does not correspond to the damage actually caused (art. 87.6).

That is why "two-way" penitential arras are valid (STS 538/2026), whereas a clause that only penalises the buyer, or lets the seller keep a high percentage of everything paid regardless of the actual loss, may be void.

If you are buying off plan, a developer that collects payments on account must guarantee their refund plus statutory interest, by bank guarantee or insurance, from the time the building permit is granted, and pay them into a special account (first additional provision of Law 38/1999 on Building Regulation, Ley de Ordenación de la Edificación). Ask for the guarantee document before paying.

Before signing: what to check

1. Request the information the law gives you. Law 12/2023 on the right to housing (art. 31) entitles you to demand, before the transaction is formalised and before paying any amount on account, information in a durable medium about the home on offer: identity of the seller and of any intermediary, total price and payment terms, habitability certificate, floor areas, age, energy performance certificate, occupancy status, registry details with charges, encumbrances and restrictions, share of the common parts (cuota de participación) and whether it is subsidised housing.
2. Obtain a recent land registry extract (nota simple): owner, mortgages, attachments, easements or other charges. If a mortgage will be paid off from the price, the contract should say so. If the property has shared paths or installations, see our guide to easements in property sales.
3. Check who must sign. If the home is community property of a married couple or is the family home, both spouses must consent (arts. 1320 and 1377 CC).
4. Ask for a certificate of debts with the owners' association (comunidad de propietarios) and the latest property tax (IBI) receipt.
5. Fit the deadline to your mortgage. The bank must give you the European Standardised Information Sheet (FEIN) at least ten calendar days before the loan is signed, and you will have to appear before the notary for the transparency certificate (acta de transparencia) no later than the day before signing (Law 5/2019 on real estate credit agreements, arts. 14 and 15). A deposit period that is too short may leave you no margin.
6. Work out the taxes. For a resale home in the Community of Madrid you will generally pay 6% Property Transfer Tax (Impuesto sobre Transmisiones Patrimoniales) on the higher of the price and the Cadastre reference value (valor de referencia del Catastro), with reduced rates and reliefs in some cases. For a new home, VAT (generally 10%) plus stamp duty (actos jurídicos documentados).

What a good deposit contract should include

• Full details of the parties and identification of the property: address, registry details, cadastral reference and annexes.
• Price, amount of the deposit and payment method, always one that leaves a trail.
• The type of arras, with an express reference to art. 1454 CC if they are penitential, and the consequences for each party.
• Deadline for the deed and how the notary appointment is set.
• Condition on handover: free of charges (or how they will be cancelled) and of occupants, and with which fixtures or furniture.
• A financing clause stating what happens if the bank refuses the mortgage.
• Allocation of costs. If nothing is agreed, the costs of executing the deed fall on the seller, and those of the first copy and any other costs after the sale on the buyer (art. 1455 CC).
• What happens if there is a delay caused by neither party and how the deadline is extended: always in writing, stating whether the type of arras is maintained.

Can a deposit contract be registered at the Land Registry?

In Madrid and the rest of Spain governed by the common Civil Code, no:

• The Land Registry (Registro de la Propiedad) only accepts public deeds, court decisions and authentic administrative documents (art. 3 of the Mortgage Law, Ley Hipotecaria). A private document cannot be registered.
• Even if you sign it before a notary, the deposit contract only creates personal obligations, and the Mortgage Regulations (Reglamento Hipotecario) expressly declare non-registrable both the obligation to transfer ownership and the obligation to enter into a contract in the future (art. 9).

Executing the arras as a notarial deed provides evidence of the date, identity and content, but does not protect you against third parties through the Registry. The exception is Catalonia: there, penitential arras agreed for a maximum of six months and deposited with a notary may be recorded at the Land Registry, with the property charged with their repayment (art. 621-8.3 of the Civil Code of Catalonia).

How to protect the buyer against third parties

• Registered purchase option. You can agree a purchase option in a public deed instead of arras. It is registrable if there is an express agreement to register it, the purchase price (and, where applicable, the option price) is set and the period for exercising it does not exceed four years (art. 14 of the Mortgage Regulations).
• Bring the deed forward. If the deal is ready, the safest course is to complete the sale and register it as soon as possible: if the seller sells the same home to two people, ownership goes to whoever registers first in good faith (art. 1473 CC), and the other buyer is usually left with a claim for compensation only.
• Preventive entry of the claim (anotación preventiva de demanda). If you sue for performance, you can ask the court to enter the claim at the Land Registry as an interim measure, provided its requirements are met, including lodging security (art. 42 of the Mortgage Law and arts. 727.5 and 728 of the Civil Procedure Act, Ley de Enjuiciamiento Civil). Since 3 April 2025 it is also possible to enter the start of an appropriate dispute resolution process concerning the property, and interim measures requested before the claim do not require prior negotiation.

If the bank refuses the mortgage

In Madrid and the rest of Spain governed by the common Civil Code there is no statutory rule allowing you to recover the deposit because the bank will not lend to you.

If the contract says nothing, the refusal does not release you on its own: with penitential arras you will lose the deposit if you withdraw, and with confirmatory arras the seller could demand performance or terminate and claim the damages it can prove.

The solution is to agree it: for example, making the purchase conditional on obtaining financing for a specific amount within a specific period, with an undertaking to apply in good faith and to prove any refusal in writing.

In Catalonia, article 621-49 of its Civil Code allows the buyer to withdraw if:

1. the contract provides that the price will be financed, in whole or in part, by a credit institution;
2. the buyer proves in writing, within the agreed period, that the institution refused to grant the financing (or to accept the buyer's subrogation into the mortgage on the property);
3. the refusal is not due to the buyer's negligence; and
4. the parties have not agreed otherwise.

If the buyer withdraws, the seller must return the price received and, where applicable, the penitential arras, and the buyer must put the seller back in the position it would have been in had the contract not been concluded. In addition, in Catalonia money handed over is presumed to be confirmatory arras, and penitential arras must be agreed expressly (art. 621-8).

What to do if the other party does not perform

1. Gather evidence: the contract, proof of payment, messages and, where relevant, the bank's refusal.
2. Serve formal notice on the other party (a burofax, a certified letter with proof of content, or a notarial demand) and, on the agreed date, attend the notary's office and have it recorded that you appeared. If you are the seller and want to terminate because the price has not been paid, in a sale of real property the demand must be judicial or notarial (art. 1504 CC): a burofax does not stop the buyer from paying after the deadline. The Supreme Court does not apply this rule where the arras are penitential (STS 270/2025).
3. Try to reach an agreement before suing. Since 3 April 2025, a civil claim can only be filed after first using an appropriate dispute resolution method (medio adecuado de solución de controversias, MASC) (Organic Law 1/2025, art. 5): direct negotiation or negotiation between lawyers, mediation, conciliation (also before a notary or land registrar), a confidential binding offer or the opinion of an independent expert.
4. Bear in mind how the MASC affects time limits. The request interrupts the limitation period (prescripción) or suspends the time bar (caducidad), and time starts running again if there is no first meeting or written reply within thirty calendar days (art. 7.1). If no agreement is reached, you must file the claim within one year for the requirement to count (art. 7.3).
5. Watch the limitation period. Claims arising from the contract are generally time-barred after five years from when performance could be demanded (art. 1964.2 CC).

How arras are taxed

• If the deal falls through and the seller keeps the deposit, the seller has a capital gain taxed in the general income tax base (IRPF) for the year in which it becomes entitled to keep it; the exemption for the sale of a main home by people over 65 does not apply, because there is no sale (ruling V3091-20 of the Directorate-General for Taxation, Dirección General de Tributos). If it is the buyer who receives double, the buyer is taxed on the amount exceeding what they paid (ruling V5317-26, of 28 July 2026). Whoever loses the deposit has a capital loss in that same base (ruling V2359-17).
• If you are buying a new home from a developer, a deposit that counts towards the price is an advance payment and VAT becomes due when you pay it (art. 75.Two of Law 37/1992 on VAT; ruling V1665-07).

Common mistakes

• Not specifying the type of arras. This is a common source of litigation: if the contract does not state clearly and unequivocally that the parties may withdraw, the arras will be treated as confirmatory. The safest course is to refer expressly to art. 1454 and describe its effects.
• Believing any deposit lets you back out. Changing your mind is only possible with penitential arras, and it costs you the deposit; with confirmatory arras, a breach may end in a claim for performance or damages.
• Not providing for a lack of financing. Outside Catalonia, without a clause, a mortgage refusal does not protect you.
• Paying before seeing the nota simple and the documents you are legally entitled to.
• Believing a notarial deed of arras protects you against third parties. It cannot be registered, except in Catalonia.
• Using a generic template without adapting deadlines, costs, proportionate penalties or regional law.

Before you go ahead

A deposit contract is not a formality: it is the document that decides what happens to your money if something goes wrong. If you are about to sign arras or already have a dispute over a deposit, you can book a property law consultation and we will review the draft, the nota simple and the deadlines with you before you sign or before they expire.

Legislation and sources

• Civil Code, arts. 1124, 1152 to 1155, 1281, 1320, 1377, 1450, 1454, 1455, 1473, 1504 and 1964 (consolidated text, BOE)
• Mortgage Law (Ley Hipotecaria), arts. 3 and 42 (BOE)
• Mortgage Regulations (Reglamento Hipotecario), arts. 9 and 14 (BOE)
• Law 1/2000, of 7 January, on Civil Procedure (Ley de Enjuiciamiento Civil), arts. 727 and 728 (BOE)
• Organic Law 1/2025, of 2 January, on measures for the efficiency of the Public Justice Service, arts. 5 to 7 (BOE)
• Law 12/2023, of 24 May, on the right to housing, art. 31 (BOE)
• Law 5/2019, of 15 March, on real estate credit agreements, arts. 14 and 15 (BOE)
• Law 38/1999, of 5 November, on Building Regulation (Ley de Ordenación de la Edificación), first additional provision (BOE)
• Consolidated text of the General Law for the Protection of Consumers and Users, arts. 82 to 87 (BOE)
• Law 3/2017, Book Six of the Civil Code of Catalonia, arts. 621-8 and 621-49 (BOE)
• Law 37/1992, of 28 December, on Value Added Tax, art. 75 (BOE)
• Directorate-General for Taxation, binding ruling V3091-20 (income tax for a seller who keeps the deposit)
• Directorate-General for Taxation, binding ruling V5317-26 (income tax on arras returned doubled)