What is a Contrato de Arras (Private Purchase Contract)?
Welcome to another Two-Minute Tuesday! In this video, Keith and Sophia are tackling the question: What is a Contrato de Arras, or Private Purchase Contract?
The Contrato de Arras is a crucial part of the property-buying process in Spain. After agreeing on the price and paying the initial reservation deposit, your lawyer conducts due diligence to ensure the property is free of debts, encumbrances, or legal issues and that the vendor has clear title to sell. Once these checks are complete, the next step is signing the Contrato de Arras (Private Purchase Contract).
How does it work?
At this stage, you’re required to pay 10% of the property’s purchase price, minus the reservation deposit. For example, if you’re buying a property for €500,000 and have already paid a €6,000 deposit, you’ll pay an additional €44,000 to bring your total deposit to €50,000 (10%).
The Contrato de Arras protects both the buyer and the seller:
- If the buyer decides not to proceed, they forfeit their 10% deposit.
- If the seller cannot complete the sale, they must return the deposit and pay an additional 10% compensation to the buyer.
This eliminates issues like gazumping (common in the UK), where a seller accepts a higher offer last-minute. In Spain, the Contrato de Arras ensures both parties are legally committed, providing security and peace of mind.
Watch the video for a detailed explanation!