If I back out after signing the deposit agreement (“arras”), do I lose what I paid? And what if the seller backs out?

Question

José Manuel Alburquerque · Accepted Answer

It depends on the type of deposit you signed up to. If it is a withdrawal deposit (“arras penitenciales”), you can withdraw by forfeiting what you paid and the seller can do so by paying you back double. If it is a confirmatory deposit (“arras confirmatorias”), which in Catalonia is what applies if the contract says nothing else, neither of you can back out. A party who fails to perform may be compelled to complete the sale or to pay for the losses they cause, which may be more or less than the deposit. With a withdrawal deposit If you back out, you lose what you paid. In Catalonia you do not lose it if you withdraw because the bank has refused you the mortgage provided for in the contract, subject to the conditions laid down by law and provided the contract does not exclude this. If the seller backs out, they must pay you back double what they received. In principle, the party who withdraws owes nothing more, because they are exercising a right the contract gives them. You must withdraw within the agreed period and give notice in a way that leaves a record, for example with a “burofax”, a certified letter with proof of content. If the seller fails to turn up for the signing and says nothing, several courts have treated this as a withdrawal, with double the deposit to be paid back. At least one, however, has treated it as a breach, which allows you to demand the sale or damages. With a confirmatory deposit The contract binds both parties and the deposit is a payment on account of the price. If you do not buy, the seller can demand that you sign and pay the rest or terminate the contract, that is, cancel it, with compensation for the losses they prove. They can keep what you paid on account of those losses, but it does not automatically become theirs. If it is the seller who does not go through with the sale, you can demand that they sign the public deed or terminate the contract and claim what you paid plus damages, but not double. If you sue them to make them sign, you can ask for a note of the claim to be entered at the “Registro de la Propiedad”, the Land Registry, so that anyone who buys the flat afterwards is bound by whatever the judgment decides. For example, with a price of 300.000 euros and a deposit of 30.000, if the seller is offered 330.000 euros, with a confirmatory deposit you can demand that they sell to you for 300.000. With a withdrawal deposit, the seller gets out of it by paying you back 60.000. Before you take the step Read the contract carefully. If it is a penalty deposit, the party in breach forfeits it or pays its amount as a penalty. Depending on how it is worded, the other party may also be able to demand performance of the contract. If it is the other party who does not turn up on the day of signing, go to the notary's office and ask for a notarial record (“acta notarial”) stating that you attended ready to sign. A private individual who receives money because of a withdrawal makes a gain that must be declared for the purposes of the “IRPF”, Spain's personal income tax. That is the case of a seller who keeps the deposit or of a buyer who receives double, for the amount above what they paid. If you have to claim the money, do so in writing. Before suing, the law requires you to attempt to reach an agreement, for example with a written proposal or mediation.