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Spanish arras deposit

What backing out of a Spanish property sale costs, and why the same amount means three different things depending on what your contract says.

The deal and the kind of deposit you signed
Price of walking away
€12,000.00
What it costs the buyer
€12,000.00
Can you be forced to buy or sell?
No
The same withdrawal under all three kinds of deposit
Kind of depositIt costs youExit priceCan you be forced?
Penitential (art. 1454)€12,000.00€12,000.00No
Confirmatory€0.00There is no exit priceYes
Penalty€12,000.00There is no exit priceYes
Detail of the money that moves
Money transferred when the deal is undone€0.00
Buyer's net result-€12,000.00
Seller's net result€12,000.00
Still to pay if performance is enforced€228,000.00
  • Look at the table: with the same penalty, a penalty deposit moves exactly the same money as a penitential one and buys no way out.
  • The article 1454 right lives as long as the deposit contract does. Once the deed is signed there is no deposit left to lose.
Fine-tune the answer
Fine-tune the answer

The agreed penalty only changes the penalty-deposit result. Where none was agreed, the penalty is the amount handed over.

Educational estimate under Spanish common civil law. It does not constitute legal advice.

Article 1454 is Spanish common civil law. Before signing or withdrawing, read your whole contract and speak to a professional.

Video: how to use the calculator

1

Thirty-four words from 1889, and the courts built everything else on top

Article 1454 of the Spanish Civil Code reads, in full: «Si hubiesen mediado arras o señal en el contrato de compra y venta, podrá rescindirse el contrato allanándose el comprador a perderlas, o el vendedor a devolverlas duplicadas». If earnest money has been paid in a contract of sale, the contract may be rescinded by the buyer accepting the loss of it, or the seller returning it doubled. That is the whole provision. The Official State Gazette’s consolidated API returns a single version of that block, in force since August 1889: it has not been touched in a hundred and thirty-seven years. It does not define the deposit, set an amount, set a deadline or distinguish kinds. The three kinds everyone names, and the argument about which applies when the contract is silent, were built by the Supreme Court on those thirty-four words.

2

The three kinds are not three price tags on one contract

They are three different contracts, and the useful way to see them is by what they permit rather than what they cost. Penitential deposits are the article 1454 ones: either side may undo the sale at a known price, and neither can force the other to go on. Confirmatory deposits are a plain advance on the price: they buy no right to leave, so whoever pulls out is in breach, and article 1124 lets the injured party choose between enforcing performance and terminating the contract with damages. Penalty deposits are a penalty clause under articles 1152 and following: the penalty replaces damages, but article 1153 says the debtor may not free themselves from performing by paying it unless that right was expressly reserved to them.

3

Why the same amount can mean freedom or mean nothing

On a 240,000 euro property with 12,000 paid, a buyer who pulls out loses 12,000 euros if the deposit is penitential and loses the same 12,000 if it is a penalty deposit with that penalty. The bank statement is identical. The difference is not the money: in the first case the deal is over, and in the second the seller may, instead of taking the penalty, require the purchase to go ahead. And if the deposit is confirmatory there is no sum at all that lets you leave, because the exit was never bought. That is why this calculator puts all three side by side on the same numbers: it is the only way to see that the figure on its own does not answer the question.

4

Returning double is not a double punishment

The symmetry of article 1454 is almost always read wrongly. When the seller withdraws they transfer twice what they received, 24,000 euros on a 12,000 euro deposit, which looks twice as harsh as losing 12,000. It is not: of those 24,000 euros, 12,000 were the buyer’s already and merely go home. The real cost of withdrawing is 12,000 euros for each side, and the provision is written precisely so that it is. Knowing that changes the negotiation: raising the deposit does not squeeze the seller harder than the buyer, it squeezes both equally.

5

When a developer is selling, the clause faces a test that does not exist between individuals

Article 87.2 of the Spanish consumer act declares unfair, for lack of reciprocity, the retention of amounts paid by a consumer on withdrawal without providing for an equivalent payment if the trader withdraws. That is, word for word, the clause a professional seller writes when it says the buyer loses the deposit and says nothing about itself. Article 85.6 adds the control of a disproportionately high penalty. And where the home is still being built, the first additional provision of the Spanish Building Act obliges the developer to guarantee the money with a bank guarantee or surety insurance from the building licence onwards, and to hold it in a special account kept separate from its other funds.

Worked example

Here is the worked example, and it is the calculator’s opening state. A 240,000 euro home, 12,000 euros paid as a deposit, which is 5 per cent of the price, and it is the buyer who pulls out. If the deposit is penitential, the price of leaving the contract is 12,000 euros, no money moves because it is already where it stays, and neither side can be forced to buy or sell. If it is confirmatory, there is no exit price: the seller can require the sale to complete, leaving 228,000 euros still to pay, or terminate and return the 12,000 while claiming whatever damages they can prove. And if it is a penalty deposit with a penalty equal to the amount paid, the buyer loses the same 12,000 euros as in the first case and still cannot walk away, because article 1153 does not let them buy their freedom with the penalty. Change only who pulls out and the penitential case moves 24,000 euros from seller to buyer, at a real cost to the seller of 12,000.

Frequently asked questions

What happens if I pull out after signing a Spanish arras contract?
It depends entirely on the kind of deposit, and that is the useful answer even though it sounds like a dodge. If it is penitential, article 1454 lets you rescind the contract by losing what you paid, and that is the end of it. If it is confirmatory, you bought no right to leave: the seller can require you to buy the property under article 1124, or terminate and claim the damages they can prove. If it is a penalty deposit, you will pay the agreed penalty and the seller may still prefer to enforce the sale, because article 1153 does not let you free yourself by paying it unless the contract expressly reserved that right to you.
If the contract does not say which kind of deposit it is, what applies?
There is no safe answer, and it is better to know that in advance. The Diccionario panhispánico del español jurídico, published by the Royal Spanish Academy and the General Council of the Judiciary, quotes the Supreme Court’s First Chamber both ways in two adjacent entries: under «arras penitenciales» it records that where the parties say nothing the deposit is understood to be the article 1454 right of withdrawal, and under «arras confirmatorias» it records that deposits must be read restrictively as a plain advance on the price. The more recent line is the restrictive one, and the judgment of 17 October 2018 adds that citing article 1454 is not enough either. The only thing that settles this is writing the kind into the contract.
How much is usually paid as a Spanish arras deposit?
Around ten per cent of the price, but it is worth knowing that this is market custom and not law: no Spanish rule sets a maximum or a minimum. What does exist is a control where the seller is a business and the buyer a consumer, because article 85.6 of the consumer act allows a disproportionately high penalty to be challenged as unfair, and article 1154 of the Civil Code lets a judge moderate the penalty where the obligation was partly performed. Between two private individuals, the freedom of contract in article 1255 governs.
If the seller pulls out, do they return double?
Only if the deposit is penitential, and the word article 1454 uses is exactly «duplicadas», doubled. On 12,000 euros paid, you receive 24,000. It is worth seeing that figure for what it is: 12,000 of those euros were yours already, so the real gain is 12,000, and withdrawing costs the seller exactly what it costs the buyer. With a confirmatory deposit there is no doubling: the seller returns what you paid, because it was an advance on the price, and you can require them to sell or claim the damages you can prove.
Can I force the seller to sell if they change their mind?
With a confirmatory or a penalty deposit, yes: article 1124 gives the injured party the choice between enforcing performance and terminating the contract, and article 1451 says that a promise to buy or sell, where there is agreement on the thing and the price, entitles the parties to require performance of each other. With a penitential deposit, no: the seller bought the right to leave by returning double, and that is what you accepted when you signed that clause.
How long does the article 1454 right to withdraw last?
As long as the deposit contract does. Article 1454 allows rescission of the contract of sale in which the deposit was paid, so the right runs out when that sale stops being pending: once the deed is signed and the home handed over there is no deposit left to lose or to double. In practice the contract itself fixes a date for the notary, and that date is what orders the whole calendar. If your contract sets a different deadline for withdrawing, the deadline you signed is the one that governs.
I am buying off-plan from a developer. Is there anything else to check?
Yes, and it is the guarantee. The first additional provision of the Spanish Building Act, as in force since 2016, obliges anyone promoting the construction of homes who intends to take money from buyers to do two things: guarantee the return of the amounts paid plus statutory interest through surety insurance or a joint bank guarantee, from the moment the building licence is obtained, and take that money through a credit institution into a special account kept separate from any other funds of theirs. The guarantee covers the applicable taxes too. If you are asked for a deposit with none of this in place, the law is not being followed.
What if my mortgage is refused?
If the contract says nothing, a refused mortgage does not release you: you will still be the party in breach, with whatever consequences the kind of deposit you signed carries. Article 1105 of the Civil Code only excuses events that could not have been foreseen, or that were foreseen but unavoidable, and a bank turning down a mortgage is a perfectly foreseeable risk. The way to deal with it is to write it in: a condition that unwinds the contract and returns the deposit if the financing is not obtained by a given date. Article 1255 allows it without any difficulty, and agreeing it costs nothing.
Is the deposit lost in full, or can a judge reduce it?
Article 1154 lets a judge equitably modify the penalty where the main obligation was partly or irregularly performed by the debtor, and that moderation reaches the penalty clause, which is to say the penalty deposit. It is not a general power to reduce: it requires partial performance. In a penitential deposit there is nothing to moderate, because no breach is being punished, a right the contract granted is being exercised. And if the seller is a business and you are a consumer, the route is not article 1154 but the unfair-terms control in articles 85.6 and 87.2.
Does the arras contract have to be signed before a notary?
No. It is a private contract and binds the parties from mere consent, as article 1258 puts it, even if nobody raises it to a public deed. Doing so has practical effects, above all if you want it to bite against third parties, but it is not a condition of validity and it does not change the kind of deposit. What does decide the kind is how the clause is drafted, and that is the part worth spending time and, if necessary, a professional’s fee on.

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Author: Thorben Rasmus Idel · Reviewed by: Nahar Geva · Last reviewed: