Contrato de Arras in Mallorca: Essential Guide for Buying Property in Spain (2025)
When buying property in Spain, the "contrato de arras" (earnest money contract) is a key step that secures the deal before the final sale. This guide will break down everything you need to know, from the different types of arras agreements to taxes, fees, and potential pitfalls—especially relevant for buyers in Mallorca and the Balearic Islands.
Types of Contrato de Arras in Spain
Before committing to a property, it's important to understand the three main types of arras contracts. Each has different legal consequences.
1. Penitential Arras ("Arras Penitenciales")
This type allows either party to back out of the agreement, but with financial consequences.
If the buyer withdraws, they lose their deposit.
If the seller withdraws, they must return double the deposit.
Example: María signs a contrato de arras to buy a villa in Mallorca, paying a 10% deposit. Later, she finds another home she prefers. Since she signed a penitential arras contract, she decides to walk away but forfeits her deposit. If the seller had backed out, they would have had to refund María double the deposit.
2. Confirmatory Arras ("Arras Confirmatorias")
This type is a firm commitment to complete the purchase. If either party defaults, the other can enforce the contract in court.
If the buyer backs out, the seller can demand the full payment.
If the seller backs out, the buyer can force the sale or seek damages.
Example: Juan agrees to buy an apartment in Palma, paying a deposit under a confirmatory arras contract. The seller later refuses to proceed. Juan can take the case to court to either force the sale or claim damages.
3. Penal Arras ("Arras Penales")
This contract includes penalties for breaking the agreement, but unlike penitential arras, additional damages may be claimed.
If the buyer defaults, they lose the deposit and may owe more.
If the seller defaults, they must refund double the deposit plus potential damages.
Example: Laura enters a penal arras contract to buy a townhouse in Mallorca. Later, the seller gets a better offer and refuses to sell. The seller must return double Laura's deposit, and Laura can claim further compensation.
Taxes & Fees When Signing a Contrato de Arras in Mallorca
While signing a contrato de arras does not trigger taxes immediately, you need to be aware of the costs involved in the final sale.
For the Buyer
- Property Transfer Tax (ITP) – 6% to 10% for resale properties (varies by region).
- Value Added Tax (IVA) – 10% for new properties instead of ITP.
- Stamp Duty (AJD) – 0.5% to 1.5%, only applies to new properties.
- Notary & Registration Fees – 1% to 2% of the purchase price.
For the Seller
- Capital Gains Tax (IRPF) – Tax on profits made from the sale.
- Municipal Plusvalía Tax – A tax on the increase in land value since the last sale.
It is important to budget for these taxes when signing an arras contract, as they will be due upon finalizing the sale.
Real-Life Scenarios: What Can Go Wrong?
1. Buyer Fails to Secure Financing
Scenario: Carlos signs a contrato de arras, assuming he will get a mortgage. His loan is later denied.
Outcome: If there’s no financing contingency in the contract, Carlos loses his deposit.
Tip: Always include a mortgage clause allowing you to withdraw without penalty if financing is denied.
2. Seller Receives a Higher Offer
Scenario: Ana agrees to sell her apartment and takes a 10% deposit from the buyer. A week later, someone else offers a higher price.
Outcome: If Ana has signed a penitential arras, she must return double the deposit to the original buyer.
Tip: Sellers should ensure they are 100% committed before signing an arras contract.
3. Legal or Structural Issues Discovered
Scenario: Luis signs a contrato de arras for a countryside house. Later, he discovers parts of the house were built illegally.
Outcome: If his contract doesn’t include a withdrawal clause for legal issues, Luis might lose his deposit if he backs out.
Tip: Do a full legal and property check before signing any contract.
Key Takeaways & Best Practices
- Choose the right type of arras contract based on your situation.
- Include protective clauses for financing, legal issues, and delays.
- Do a legal and property check before signing.
- Work with a trusted real estate lawyer to review all documents.
Buying property in Mallorca? A contrato de arras is a crucial step—understanding it will help you avoid costly mistakes. Be prepared, protect yourself, and navigate the process with confidence.