Carlos Baos – Expert Legal Advice on Conveyancing

Why getting expert legal advice when buying or selling a property in Spain is key: the reservation contract.

The significance of obtaining professional legal guidance in real estate transactions cannot be overstated. Special when signing the initial documents and in a purchase or sales agreement. In this week’s column we will address a frequent misconception: the perception that preliminary document or reservation contract signed in the real estate agency, lacks significance. And that you will get your money back no matter what if you decide not to move forward with the purchase or the sale.

In Spain there are many names to identify the private documents that the parties (buyer and vendor) can sign when conveyancing a property. Reservation contract, private contract of purchase, “contrato de arras”, etc. All of these documents are equally important. Since all of the will create rights and obligations in both parties, having legal consequences that cannot be underestimated.

Does an “arras contract” truly exist? Surprisingly, no. The term “arras contract” doesn’t exist under Spanish Law. However, “arras” is an agreement/clause that can be incorporated into a purchase/sale contract. There are three types of “arras”: confirmatory, penal, and penitential. The distinction between penalty and penitential “arras” can be complex, depending on how the contract is drafted and the exact wording used. The consequences of choosing one or the other are abysmal. In both cases, the penalty is the same for the non-performing party: the buyer loses the amounts paid; the seller must return what has been received in duplicate. However, only the “arras” penitenciales allow for unilateral termination of the contract. Whereas under an “arras” penales, either party can demand performance and compliance of the contract from the other.

Sometimes, both vendors and buyers assume that a reservation contract merely removes the property from the market. And that the “important” document is the private contract. This could not be further from the truth. If after signing the reservation document, the parties do not reach an agreement about the terms and clauses of the private contract (for instance because the property has some issues related to is cadastral, urban or occupational state) the parties will be left only with the reservation contract originally signed. And if the document is vague, not very precise, and does not foresee all scenarios… it could be problematic, lead to conflicts, risking payment loss, double refunds, or even the initial agreement enforcement. A well-drafted agreement’s importance surfaces precisely in these cases.

At White Baos Abogados, we specialise legal matters related to the purchase and sale of properties in Spain. Feel free to reach out to us. We will assess your case and offer specialised legal guidance on the initial stages of property transactions.

You may be interested in the following services and articles:

Can I request the termination of a property purchase contract and claim for my money back if I am not able to get finance?.

Purchase Contract resolution or termination. Failure to pay the price by the buyer. Notary request. Legal actions and advice.

New Success. We won a Supreme Court case about a penalty clause on a purchase contract of a hotel. Successful Court Decision Nets Client €700,000. Modification of the penalty.

Carlos Baos (Lawyer)

White & Baos.

Tel: +34 966 426 185

E-mail: info@white-baos.com

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