What is a penitential deposit agreement?

The arras penitenciales, or penitential deposit agreement, is the most commonly used arrangement in Spanish real estate transactions. It is regulated by Article 1454 of the Spanish Civil Code and allows either party to withdraw from the agreement under specific conditions.

If the buyer backs out, they forfeit the deposit paid. If the seller breaches the agreement, they must return double the deposit received. This type of agreement offers legal security while allowing a degree of flexibility for both parties.

Key information to include in a penitential deposit agreement

To be valid and enforceable, a penitential deposit agreement should include the following elements:

• Identification of both parties: Full legal names and ID information of the buyer and seller.

• Property details: Full address, land registry reference number (referencia catastral), and main characteristics of the property.

• Purchase price: Total agreed price, deposit amount paid as a guarantee, and a schedule of future payments.

• Deadline for signing the public deed: A final date for the completion of the sale before a notary.

• Withdrawal terms and penalties: Clear consequences for either party if the agreement is broken.

• Associated costs: A breakdown of who covers notary fees, taxes, and other expenses. In Spain, the buyer typically pays all purchase-related costs, except for the capital gains tax (plusvalía), which is paid by the seller. Municipal taxes like IBI (property tax) and waste collection fees are usually split proportionally according to the date of sale.

Before drafting the contract, a land registry extract (Nota Simple) and other relevant documents must be requested to confirm the seller's legal ownership of the property.

Once the deposit agreement is signed, both parties can move forward with preparing the necessary documents and scheduling the notary appointment for signing the deed of sale (escritura pública).

Documents to review after signing the deposit agreement and before completing the purchase

It’s important to verify the following documents between the deposit signing and final completion:

• Energy efficiency certificate

• Occupancy permit or first/second occupancy license (depending on the property type)

• Proof of up-to-date payments for property taxes, waste fees, and community fees

• Confirmation that the property is free of charges or debts

• Seller's title deed

• Tax withholding adjustments if the seller is a non-resident in Spain

The penitential deposit agreement is the most frequently used legal tool for securing a property sale in Spain. It clearly defines the terms of the agreement and protects the interests of both buyer and seller by setting out clear financial consequences in case of withdrawal. Depending on whether the property is newly built, under construction, or second-hand, the required documentation will vary. That’s why it’s highly recommended to seek professional guidance to ensure a smooth and secure process — without surprises.