At Welex, your English-speaking law firm specializing in real estate transactions in Spain, we are pleased to address various queries regarding breaches of property purchase agreements in Spain.
What happens if I breach a property purchase agreement in Spain? Consequences for buyers and sellers
If you are interested in buying or selling a property in Spain, it is very likely that, to remove the property from the market, you will be required to sign a deposit agreement (Contrato de Arras).
According to Spanish legal doctrine, a deposit agreement is a contract whereby one party delivers a sum of money to the other party as a deposit towards the transaction. This payment serves as a guarantee that both the buyer and the seller will fulfil the obligations they have assumed.
In other words, the buyer pays a deposit to the seller to reserve the property until the signing of the title deed before a notary. This reservation is accompanied by the signing of a deposit agreement, in which both parties undertake to complete the purchase and sale of the property.
What is considered a breach of a property purchase agreement in Spain?
On the buyer’s side, a breach of the deposit agreement occurs when:
- The buyer fails to pay the amount agreed upon by both parties; or
- The buyer fails to appear on the agreed date for the signing of the title deed before a notary.
On the seller’s side, a breach occurs when:
- The seller fails to appear before the notary to sign the title deed; or
- The seller fails to deliver the property within the timeframe established in the agreement.
What happens if the buyer breaches the deposit agreement in Spain?
If the buyer fails to comply with any of the obligations established in the deposit agreement—typically by failing to pay the agreed amount or by not attending the signing of the title deed before a notary—the seller may choose between the following options:
- Requiring the buyer to fulfil the agreement through the appropriate legal channels; or
- Terminating the deposit agreement and retaining all amounts previously paid by the buyer.
Important: A lack of sufficient funds or the refusal of a mortgage application by a bank does not generally constitute a valid reason to terminate the agreement, unless the parties have expressly agreed upon such a condition.
What happens if the seller breaches the deposit agreement?
If the seller fails to attend the notary’s office on the date established in the agreement to sign the title deed and hand over the keys to the property, the buyer may choose between:
- Requiring the seller to fulfil the agreement through the appropriate legal channels; or
- Terminating the deposit agreement, in which case the seller must return double the amount received as compensation.
Is it considered a breach if a planning infringement is discovered during the legal due diligence process and the buyer withdraws from the purchase?
In these situations, our law firm, specialized in real estate transactions in Spain, always recommends making the deposit agreement conditional upon a full legal review of the property documentation and, where appropriate, the successful issuance of a Certificate of No Urban Planning Infringement (Certificado de No Infracción Urbanística) by the relevant Town Hall.
We usually include a clause stating that if the legal review produces an unfavourable result, or if the Certificate of No Urban Planning Infringement reveals the existence of administrative proceedings or urban planning issues affecting the property, the buyer may terminate the deposit agreement and request the return of all amounts paid up to that date, without any penalties for either party.
If you would like to learn more about the legal due diligence process carried out by our firm or about the Certificate of No Urban Planning Infringement, please consult the following articles:
https://www.welex.es/legal-and-tax-services/
https://www.welex.es/the-certificate-of-no-urban-planning-violation-in-spain/
What happens if one of the parties fails to attend the notary appointment?
As mentioned above, the failure of either party to appear before the notary constitutes a breach of the signed deposit agreement, with the consequences outlined previously.
At Welex, a law firm based in Marbella, we recommend that the party who does attend the notary appointment to sign the title deed execute a notarial attendance record (Acta de Comparecencia). This document serves as evidence that the party has fulfilled their contractual obligation to attend the signing.
A notarial attendance record is a document executed before a notary in which one or more individuals formally declare or certify a fact. In this case, it confirms that the party attended the notary’s office to sign the title deed.
We recommend signing this attendance record to facilitate any future action seeking either the termination of the agreement or the enforcement of its terms.
Different types of deposit agreements in Spain
It’s important to note that Spanish law recognises different types of deposit agreements. If you would like to learn more about this subject, you may consult the following article:
https://www.welex.es/types-of-contracts-for-the-sale-of-a-property-in-spain/
Breaching a deposit agreement may have significant legal and financial consequences for the party in default. Therefore, before signing such an agreement, we recommend contacting Welex. Our team will analyse your specific circumstances and advise you on the legal options available to you.
