Complete Guide to the Arras Contract in Galicia: Everything You Must Know Before Signing

What is the arras contract and why is it so important?

The arras contract is a preliminary purchase agreement signed after reaching a verbal agreement on the price of a property, but before the public deed before a notary. In Spanish real estate practice, and especially in Galicia, this contract is the step that converts an informal promise into a legally binding commitment with real economic consequences.

The name comes from the Latin arrha, meaning "money given as a sign." This document protects both buyer and seller during the preparation period: obtaining mortgage financing, gathering documentation, conducting legal and urban planning checks, and coordinating the notary signing.

On the Costa da Morte, where many properties are traditional stone houses with complex urban planning particularities, the arras contract provides an indispensable framework of legal security. Without it, either party could withdraw from the agreement without consequences, leaving the other party vulnerable after weeks or months of preparation.

It is essential to understand that the arras contract does not transfer ownership. Title is only transferred with the signing of the purchase deed before a notary and its subsequent registration in the Land Registry. Arras is a preparatory contract, but with very specific legal effects that vary depending on the type chosen.

The three types of arras in Spain

Spanish Civil Law recognizes different types of arras, each with different legal consequences. Choosing the right type is one of the most important decisions in the purchase process.

Penitential arras (the most common)

Regulated by Article 1454 of the Civil Code, these are the most frequent type in Spanish real estate transactions. Their main characteristic is that they allow either party to withdraw from the contract:

• If the buyer backs out: they lose the amount given as arras (the deposit). The seller keeps that money as compensation.
• If the seller backs out: they must return double the amount received. That is, if they received €20,000 in arras, they must return €40,000.

This asymmetric penalty mechanism especially protects the buyer, who is usually the more vulnerable party. A seller who receives penitential arras knows that backing out will be very expensive, which discourages opportunistic behavior, for example, if they receive a better offer during the preparation period.

In Galicia, the standard practice on the Costa da Morte and surrounding areas is to use penitential arras in approximately 90% of residential transactions.

Confirmatory arras

Unlike penitential arras, confirmatory arras do not allow withdrawal. They are a sign that confirms the contract and obliges both parties to fully comply. If one party breaches, the other can demand specific performance of the contract plus compensation for damages.

This type of arras is used in transactions where both parties have a firm and unbreakable commitment. For example, when the buyer already has guaranteed financing and the seller needs to close urgently to purchase another property.

The practical difference is enormous: with confirmatory arras, if the seller tries to back out, the buyer can take the case to court and force the transfer of ownership, something impossible with penitential arras where the only consequence is returning double the deposit.

Penal arras

Penal arras function as an additional penalty clause. An amount is established as a fine for breach, but without replacing the main obligation to buy and sell. If one party breaches, in addition to being able to demand performance of the contract, the injured party can claim the agreed penalty.

This type is less common in residential real estate transactions and is reserved for complex or high-value operations where the parties want to establish an additional deterrent against breach.

How much is given as arras? The standard deposit in Galicia

The amount given as arras is usually a percentage of the total purchase price. There is no legally required amount, but standard practice in Galicia establishes the following figures:

• Standard deposit: 10% of the purchase price. For a property worth €150,000, the arras would be €15,000.
• Usual range: between 5% and 15%. In highly demanded areas of the Costa da Morte, deposits below 10% are rare.
• Minimum amounts: some contracts establish a minimum of €3,000 to €6,000 for low-priced properties, but this offers little real protection.

The amount should be sufficient to deter the seller from accepting another offer during the preparation period. A 10% deposit on a €200,000 home (€20,000) is a reasonable guarantee. If the deposit is too low, the seller might find it economically advantageous to return double and accept a higher offer.

For high-value properties in premium locations like Corcubión or Fisterra, where prices can exceed €400,000, a 10% deposit (€40,000) provides solid protection for the buyer.

Timeline: from arras to notary

The arras contract must always specify a deadline for signing the purchase deed before a notary. Typical timelines in Galicia are:

• Standard timeline: 1 to 3 months from signing arras to the notary deed.
• Timeline for buyers with a mortgage: 2 to 3 months, as the mortgage approval process in Spain typically takes 4 to 8 weeks.
• Timeline for cash buyers: 1 month or less, since they do not need to wait for bank approval.
• Extension: most contracts include an automatic extension clause of 15-30 additional days if both parties agree.

It is crucial that the timeline is realistic. Too short a deadline creates unnecessary pressure and can lead to breach. Too long a period keeps both parties in uncertainty. Experience on the Costa da Morte shows that 2 months is the optimal timeline for most transactions.

If the deadline expires without the deed being signed and without an extension agreement, the consequences depend on the type of arras. With penitential arras, either party can withdraw with the corresponding penalties. With confirmatory arras, the complying party can demand specific performance.

Required content of the arras contract

A well-drafted arras contract should include, at minimum, the following elements:

• Party details: full names, ID/NIE numbers, addresses, and marital status of buyer and seller.
• Detailed property description: full address, cadastral reference, surface area, boundaries, and any particularities such as rights of way or easements.
• Total purchase price: specific amount in euros, indicating whether it includes or excludes furniture, fixtures, or other elements.
• Amount given as arras: exact amount, payment method (bank transfer recommended), and type of arras (penitential, confirmatory, or penal).
• Deadline for signing before notary: specific date or maximum period.
• Cost allocation: who bears notary, registry, tax, and agency fees.
• Encumbrance status: declaration regarding mortgages, liens, or other charges on the property, and commitment to cancel them if applicable.
• Conditions precedent: clauses conditioning the transaction (subject to mortgage, subject to favorable nota simple, etc.).
• Penalties: consequences of breach depending on the type of arras chosen.

On the Costa da Morte, it is especially important to include a clause on the urban planning status of the property, as many rural homes, particularly renovated or unrenovated stone houses, may have urban planning irregularities that must be resolved before the sale.

Risks for the buyer: what can go wrong

Buying a property is probably the most important investment you will make. Understanding the risks associated with the arras contract will help you protect yourself adequately.

The seller backs out

If you have penitential arras and the seller decides not to sell, they will return double what you gave them. But this may not compensate you if the market has risen or if you have spent money on procedures (valuation, preliminary notary, agency). Also, the claim process can be slow if the seller resists paying.

Tip: If you detect signs that the seller might back out (listed with multiple agencies, receiving many viewings, has urgent debts), consider negotiating confirmatory arras or increasing the deposit.

The buyer cannot get a mortgage

This is the most common risk. If you did not include a "subject to mortgage approval" clause, you will lose your deposit if the bank denies financing. Always include this condition precedent if you need a mortgage to buy.

The clause should specify: the deadline for obtaining the mortgage (usually the same as the contract), the minimum amount needed (e.g., 70-80% of the price), and what happens if it is not obtained (full return of arras without penalty).

Hidden defects or urban planning issues

After signing arras, you may discover problems not visible during the initial visit: structural dampness, unauthorized extensions, lack of habitability certificate, or boundary issues on rustic properties.

Tip: Always include an urban planning verification condition and commission a technical inspection before signing the deed. On the Costa da Morte, where centuries-old stone houses abound, this check is absolutely essential.

Unknown liens or encumbrances

The property could have undisclosed charges: tax liens, unreleased mortgages, or usufruct rights. The Nota Simple from the Land Registry before signing arras is mandatory to detect these situations.

Special considerations for non-resident buyers

Foreign buyers face additional particularities in the arras contract in Galicia:

• Mandatory NIE: You need the NIE to sign the arras contract. If you do not have one yet, the process can take 1 to 4 weeks depending on your nationality.
• Spanish bank account: The arras deposit must be made from an identifiable account. Having a Spanish bank account greatly streamlines the process.
• Sworn translation: If you do not speak Spanish fluently, it is recommended that the contract be translated and that you have a sworn translator at signing. Some notaries may require this.
• Hague Apostille: If you sign from your home country via notary power of attorney, the power must be apostilled and translated into Spanish.
• International transfers: International bank transfers can take 3-5 business days. Plan payments in advance to avoid missing deadlines.
• Tax withholding: If the seller is a non-resident, the buyer must withhold 3% of the price for the Tax Agency. This must be reflected in the contract.

For German, French, and British buyers purchasing on the Costa da Morte, geographical distance makes conditions precedent even more important. You will not be able to make frequent visits to verify the property condition, so delegating these checks to a trusted professional is essential.

How to protect yourself: essential conditions precedent

Conditions precedent are clauses establishing that the sale will only be completed if certain conditions are met. If they are not met, the contract is voided and arras are returned. They are your main protection tool.

• Subject to mortgage approval: The transaction is conditioned on obtaining a mortgage for a minimum amount within a specified period. If the bank denies it, you get your money back.
• Subject to favorable nota simple: Condition that the Land Registry confirms the legal status of the property without undisclosed charges.
• Subject to first occupancy license or habitability certificate: Especially important for new or renovated homes.
• Subject to favorable urban planning report: Verification that the property complies with current urban planning regulations, fundamental in rural areas of the Costa da Morte.
• Subject to technical inspection: Possibility of commissioning a technical review of the building condition before committing definitively.
• Subject to cadastral boundary verification: On rustic properties, verifying that Cadastre boundaries match the physical reality of the land.

Professional recommendation: Never sign an arras contract without at least the mortgage condition (if applicable) and favorable nota simple. On the Costa da Morte, always add urban planning verification.

Difference between arras contract and purchase contract

It is essential to distinguish between the two contracts, as they serve different legal functions:

• Arras contract: A preliminary contract. Does not transfer ownership. Establishes the commitment of the parties and the conditions under which the sale will take place. Signed between the parties, usually with the advice of a lawyer or real estate agent.
• Purchase contract (public deed): The definitive contract. Transfers ownership from seller to buyer. Signed before a notary, who gives public faith of the transaction. Registered in the Land Registry. This is the document that legally makes you the owner.

The usual chronological sequence is: 1) Verbal agreement on price, 2) Signing of arras contract with deposit payment, 3) Preparation period (mortgage, documentation, checks), 4) Signing of purchase deed before notary with payment of the remainder, 5) Registration in the Land Registry.

Practical cases on the Costa da Morte

Case 1: Stone house in Corcubión

A German couple agrees to buy a renovated stone house in Corcubión for €180,000. They sign penitential arras of 10% (€18,000) with a 2-month deadline for signing before the notary, conditioned on obtaining a mortgage. The bank approves the mortgage in 5 weeks. The deed is signed on schedule and the couple receives the keys to their new home on the Costa da Morte.

Case 2: Rustic land near Fisterra

A British buyer signs arras for a 2,000 m² rustic plot near Fisterra for €45,000, giving €4,500 (10%). He did not include an urban planning verification condition. During the preparation period, he discovers that part of the land is in a protected zone and cannot be built on. Since the arras were penitential and there was no urban planning condition, he loses the €4,500. This case demonstrates the importance of appropriate conditions precedent.

Case 3: Seller backs out in Cee

A buyer gives €20,000 in penitential arras for an apartment in Cee valued at €200,000. Weeks later, the seller receives an offer of €230,000 and decides to back out. Exercising their right of withdrawal, they must return €40,000 (double). The buyer, though initially frustrated, receives a €20,000 compensation that allows them to continue their search with a larger budget.

Frequently asked questions about the arras contract

• Can I sign arras without a lawyer? Legally yes, but it is not recommended. A real estate law specialist will ensure the contract protects your interests.
• Is the arras deposit tax deductible? No. The deposit is part of the purchase price and has no independent tax treatment.
• What happens if the seller dies during the arras period? The contract remains bound to the estate. Heirs must fulfill the deceased's obligations, although this may cause delays.
• Can I sell my right to purchase? Legally it is possible to assign the arras contract, but this requires the seller's consent in most cases.
• Are arras paid to the seller or a third party? Most commonly, the money is transferred to the seller's account, but it can also be deposited in a lawyer's or real estate agent's account as security until the notary signing.

You need professional advice

The arras contract is a document with significant legal and economic implications. A drafting error can cost you thousands of euros. At Cristina Casas Galiza, we accompany you through the entire purchase process on the Costa da Morte, from finding the ideal property to signing before the notary, ensuring every step is backed by maximum legal security.

Are you thinking about buying a property on the Costa da Morte? Contact us today and we will help you draft an arras contract that fully protects your interests. Discover our available properties and let our experts guide you through every phase of the process.

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