The Arras Contract: What Your Deposit Really Commits You To

For buyers moving from the United Kingdom, the period between finding a property in Spain and signing before a notary can feel short, especially once an arras contract sets a date. Understanding what that document actually promises, in plain terms, helps avoid a costly surprise.

This page sets out what an arras contract typically covers, what each side risks by withdrawing, and the practical steps — from the Spanish tax number to currency transfers — that a buyer based in the United Kingdom should have in hand before signing.

An arras contract (contrato de arras) is a private agreement signed between buyer and seller before the sale goes to a Spanish notary. It sets out the price, the property description, the date for completion, and the deposit the buyer pays to reserve the home while the paperwork for the deed is prepared. It is not a formality: once both parties sign, Spanish law treats it as a binding promise to buy and sell, not a casual reservation.

Most arras used in residential sales in Spain are the 'arras penitenciales' type, which allow either side to withdraw, but at a cost agreed in the contract itself. Reading the wording line by line, ideally with a lawyer, matters more than the amount of the deposit: the consequences of pulling out are written into that document, not into general law.

Under the typical 'arras penitenciales' model, if the buyer backs out, the deposit normally stays with the seller. If the seller backs out, the usual penalty is to return double the deposit paid. These outcomes are only automatic if the contract spells them out this way; some agreements are drafted with different splits, caps or extra conditions, so the exact wording is what will be enforced, not a general custom.

There are other, less common forms of arras — 'confirmatorias' and 'penales' — that limit or remove the right to simply walk away and pay a penalty, instead allowing the other party to demand that the sale goes ahead. Buyers from the United Kingdom sometimes assume all deposits work the same way; they do not, and the label at the top of the document is less important than the clauses underneath it.

Signing arras is not the same as signing the deed. The deed is executed later before a Spanish notary, who confirms identities, checks the title at the Land Registry and registers the new ownership once signed. Between the arras contract and that appointment, both sides usually complete their checks: confirming there are no outstanding charges on the property, agreeing on included fittings, and arranging the lawyer, gestoría and bank steps a foreign buyer typically needs.

For a buyer living in the United Kingdom, this gap is also when exchange-rate movements and the cost of converting pounds into euros become relevant, since the deposit and the balance at completion are usually paid in euros. Planning the transfer in advance, rather than at the last moment, avoids surprises that have nothing to do with the arras contract itself but can still affect how much reaches Spain on time.

Because the arras contract fixes a date and a price, it is worth having the basic financial paperwork in order before signing rather than after, especially if a mortgage from a Spanish lender is part of the plan. Lenders working with non-residents, such as our partner Colibrí Finances, will ask for recent proof of income and existing commitments; gathering it early avoids rushing once the clock set by the arras contract has started.

None of this removes the need for independent advice: a Spanish lawyer should review the arras wording, and a tax adviser should confirm, under the double taxation agreement between Spain and the United Kingdom, how any future rental income or gain will need to be reported to HMRC as well as in Spain.

Spain is a relatively short flight away from most UK airports, making regular visits to a Spanish property straightforward for owners based in Britain. Many British buyers are drawn to Spain for its climate, coastal lifestyle and established expatriate communities. One practical point to bear in mind is that Spanish inheritance law differs from UK rules, so it is worth taking specific advice on how it may affect the property and one's estate. Currency movements between sterling and the euro can also affect the overall cost of purchase and ongoing expenses.

Spain and the United Kingdom have a double taxation agreement in place, and a local tax adviser should confirm how rental income or gains from Spanish property must be declared and reported to HMRC.

As the United Kingdom is no longer an EU member state, British citizens may stay in Spain for up to 90 days in any 180-day period without a visa, and must apply for a visa or residence permit for longer stays.

Since the United Kingdom uses the pound sterling (GBP) rather than the euro, buyers should factor in exchange-rate movements and currency conversion costs when paying for a property or transferring funds to Spain.