What arras penitenciales (penitential earnest money) are is one of the most frequent questions among those preparing to buy a property in Spain. In essence, they consist of a sum of money that the buyer delivers to the seller as a guarantee of the transaction, but with a fundamental particularity: they grant both parties the right to back out (withdraw) unilaterally before signing the public deed (escritura pública) before a notary.
Understanding how this legal mechanism works is crucial to avoid putting your savings at risk or finding yourself trapped in a contract with unexpected consequences.
What exactly are arras penitenciales?
The contract of arras penitenciales (contrato de arras penitenciales) is, in practice, a lawful withdrawal agreement. It allows the buyer or the seller to unilaterally terminate the sale without needing to justify a force majeure event or allege a breach of contract by the other party.
The economic consequences of exercising this right of withdrawal are strictly regulated by law:
- If the buyer withdraws: they lose the sum of money handed over as a deposit.
- If the seller withdraws: they must return twice the amount received to the buyer (the double).
This regulation is supported by Article 1454 of the Código Civil (Spanish Civil Code), and in a very detailed manner in Cataluña by Article 621-8 of the Código Civil de Cataluña (Civil Code of Catalonia). The Consejo General del Notariado (General Council of the Notariat) itself regularly points out that these amounts function as a pre-established compensation for the party harmed by the withdrawal.
Arras penitenciales must be expressly agreed upon
An extremely common mistake in the real estate sector is to think that any document titled "Contrato de Arras" or any payment made as a "paga y señal" (deposit) automatically grants the right to withdraw by losing the money.
This is not the case. For the earnest money to be considered penitenciales, the intention to grant this right of withdrawal must be stated clearly and unequivocally in the document. The jurisprudence of the Tribunal Supremo (Supreme Court) determines that arras penitenciales are exceptional in nature and must be subject to a restrictive interpretation.
In Cataluña, the general rule regarding the delivery of money is that they are considered arras confirmatorias (confirmatory earnest money, an advance payment on account of the price) unless explicitly agreed otherwise. Therefore, a well-drafted clause must make specific reference to the corresponding legal article. An example of safe drafting would be:
"The parties expressly agree that the amount delivered has the character of arras penitenciales in accordance with Article 621-8 of the Código Civil de Cataluña. The buyer may withdraw from the sale losing the amount delivered, and the seller may withdraw by returning it doubled to the buyer."
Difference between arras confirmatorias and penitenciales
Although both mechanisms involve the disbursement of a sum of money during the preparatory phase of the sale, their legal effects are radically opposed.
| Feature | Confirmatory Earnest Money (Arras Confirmatorias) | Penitential Earnest Money (Arras Penitenciales) |
|---|---|---|
| Main purpose | Confirm the conclusion of the contract | Allow unilateral withdrawal |
| Can the sale be demanded? | Yes, legally through courts | No, payment of the penalty releases the party |
| Consequence for the buyer | Lawsuit for breach or termination | Strict loss of the deposit paid |
| Consequence for the seller | Lawsuit to force the sale or compensate | Return of double the deposit |
Confirmatory earnest money (Arras confirmatorias)
They represent a first part of the payment of the total price. If one of the parties decides not to proceed with the transaction, it is not enough to lose the deposit; the compliant party can demand in court the specific performance of the contract (forcing to buy or sell) or request its termination with a claim for damages that could be much higher than the money initially paid.
Penitential earnest money (Arras penitenciales)
They function as a kind of pre-agreed "termination penalty". They offer greater flexibility because they prevent the other party from dragging you into court to force you to buy or sell, since the contract itself sets the financial cost of withdrawal.
Withdrawal and breach: What is the difference?
It is vital to distinguish the right to withdraw from a breach of contract:
- To withdraw (Desistir) is to use an escape route that the contract itself grants you by mutual agreement, assuming the penalty (losing the money or returning double).
- To breach (Incumplir) is to violate an agreed obligation without legal justification (for example, if the deadline to sign the deed expires and you fail to appear before a notary public without having formally exercised the right of withdrawal).
In the event of a straightforward breach of confirmatory earnest money or purchase agreements, the legal scenario becomes complicated and opens the door to much more severe claims for damages. Therefore, it is always advisable to review a penitential earnest money agreement with professionals to know exactly what you are committing yourself to.
Can the buyer withdraw for any reason?
Under a validly signed penitential earnest money agreement, the buyer enjoys absolute freedom to withdraw from the purchase within the agreed period. They can do so because they have found a better house, because they have changed their mind, or because their personal plans have changed. The only direct consequence will be the loss of the money paid.
However, not all cancellation reasons are voluntary withdrawals. If issues arise that are unrelated to the buyer, such as the appearance of hidden encumbrances or habitability problems, this would constitute a breach of contract by the seller. In this case, the buyer could terminate the contract and recover their money without penalties. For this reason, it is essential to check for charges before handing over the deposit by requesting an updated "nota simple" (property registry filing).
What happens if the bank does not grant the mortgage?
This is one of the biggest fears of any home buyer. If you sign an earnest money agreement (contrato de arras) and the bank ultimately does not approve your loan, you could lose all the money paid.
To avoid this situation, it is essential to introduce a financing clause. In Catalonia, Article 621-49 of the Código Civil (Civil Code) offers excellent protection: if it is agreed that the price will be paid with bank financing, the buyer who does not obtain the credit may withdraw from the contract and fully recover the amounts paid, provided that they documentarily prove the bank's rejection within the agreed period and that there has been no negligence on their part.
If you wish to understand this mechanism in depth, we recommend informing yourself on how to recover the arras due to financing rejection to draft a robust protection clause.
Consequences if the seller withdraws
If the homeowner decides to back out —for example, because they have received a significantly higher purchase offer from another interested party—, the contract of arras penitenciales (penitential earnest money contract) allows them to do so, but at a cost: returning the arras twofold.
To visualize this clearly, let's consider the following numerical example:
- The buyer delivers 15,000 € as arras penitenciales upon signing the pre-contract.
- The seller decides to withdraw from the sale and purchase transaction.
- The seller has the legal obligation to transfer a total of 30,000 € to the buyer.
- This amount consists of the return of the 15,000 € that the buyer initially contributed, plus another 15,000 € as a penalty for the withdrawal.
How much money is delivered and when?
Spanish law does not impose a mandatory percentage. The amount is freely set by mutual agreement between buyer and seller, taking into account factors such as the total value of the property, the agreed period for signing the public deed, and the level of commitment they wish to assume.
In the standard practice of the Spanish real estate market, 10% of the total purchase price is usually delivered. This money is paid via secure bank transfer at the moment of signing the private contract of arras and is applied as a down payment toward the final price upon the subsequent signing of the public deed before a notary.
Before making this payment, it is crucial that you correctly understand the difference between a reservation and an arras contract to know exactly what type of document you are signing.
The notarial deposit of arras in Catalonia
The Código Civil de Cataluña (Civil Code of Catalonia) introduces a very powerful legal certainty tool: the possibility of making a notarial deposit of the arras for a maximum period of six months.
This deposit can be recorded in the Registro de la Propiedad (Property Registry), so that the property is directly bound to the return of the arras if the seller withdraws or if the deed is not signed due to causes attributable to them. This path is especially recommended when the amounts of money delivered are very high or the transaction is prolonged over time.
What must a secure contract of arras penitenciales include?
To ensure the contract protects you against unforeseen events and guarantees your investment, make sure it contains at least the following key clauses:
- Precise identification of the signing parties and the property (registry and cadastral data).
- Unequivocal drafting of the penitential nature of the earnest money deposit (arras penitenciales) with express mention of the applicable Código Civil (Civil Code).
- Maximum term and exact deadline to appear before the notary.
- Specific conditions of the financing and mortgage.
- Stipulation regarding the status of encumbrances on the property and the seller's obligation to cancel them prior to the sale.
To ensure a template with full legal guarantees, it is useful to review in detail what an earnest money contract must include adjusted to the territorial framework of your purchase.
Common mistakes when signing penitential earnest money agreements
- Use of generic internet contracts: they do not contemplate the specificities of the Código Civil de Cataluña (Civil Code of Catalonia) or lack financial protection clauses.
- Not checking the nota simple beforehand: signing an earnest money agreement on a property with foreclosures or complex encumbrances without knowing it in advance. We suggest reviewing documentation before signing earnest money agreements to avoid unpleasant surprises.
- Not regulating communication terms: omitting how and when unilateral withdrawal must be formally notified (for example, via burofax).
- Delivering amounts to agencies without express authorization: transferring funds to intermediaries who do not hold a valid power of representation from the seller.
Conclusion: The importance of good drafting
Penitential earnest money (arras penitenciales) represents an ideal balance between commitment and flexibility in the Spanish housing market: it allows you to terminate the transaction in exchange for a controlled financial loss, but also grants the same right of withdrawal to the seller.
Do not put at risk the money you have worked so hard to save. Before signing any document or making a transfer, we advise you to perform a comprehensive real estate due diligence and count on specialized advice to validate each clause of the contract.
This article is for informational purposes only and under no circumstances replaces personalized legal advice tailored to the particular circumstances of your transaction.
Before signing the deposit
If you are considering buying in Barcelona, read the full guide: Buying a flat in Barcelona without surprises.