Reservation Contract Spain

What does it cost to withdraw from a purchase on Mallorca?

Anyone who buys a property on Mallorca knows the dilemma: the property has been found, but weeks pass until the notary appointment – and good properties change owners quickly. The preliminary contract closes this gap. Which one you sign determines what a withdrawal costs: only one of the three contract types actually buys you the exit. The calculator shows you both sides for your case – yours and the seller's.

This depends solely on which type of deposit your contract agrees. With arras penitenciales – the earnest money under Art. 1454 Código Civil – withdrawal is expressly permitted and has a fixed price: the buyer loses the deposit, the seller returns it at 200% back. With arras confirmatorias (confirmation deposit, which is offset against the purchase price) and arras penales (contractual penalty), this right of withdrawal does not exist – the deposit is then not a price for withdrawal, but an advance payment on a contract to which both parties remain bound.

This is exactly where the most costly mistake of German buyers on Mallorca lies: they consider the deposit to be the upper limit of their risk. That is only true in the first case.

The three contract types – and why only one buys you the exit

In practice, you'll encounter three preliminary contract models on Mallorca. They differ less in the amount than in the question of what happens if one party no longer wants to proceed.

The table deliberately names no amounts: the level of the deposit is freely agreed (Art. 1255 Código Civil), and what it means in an actual dispute is calculated by the calculator above for your contract.

The reservation agreement (contrato de reserva)

The reservation agreement is the first and usually least binding step: it takes the property off the market for a few days or weeks, in exchange for a comparatively small fee. It sets out how long the reservation lasts, how high the fee is, and whether it is credited against the purchase price. As common market practice, fees for new-build projects lie in the low four-figure range; what counts, however, is not some number but your contract. It is often concluded as a private agreement and frequently prepared by the estate agent – nevertheless, your own lawyer should still review it.

Note: A reservation agreement is not an arras agreement. Without an express penalty clause (cláusula penal), the seller may, under certain circumstances, still sell the property to someone else – you would then only get your fee back.

Arras penitenciales – the forfeit/withdrawal deposit

The arras penitenciales (withdrawal deposit) are the most common instrument used when buying property in Spain. Art. 1454 Código Civil states literally: „Si hubiesen mediado arras o señal en el contrato de compra y venta, podrá rescindirse el contrato allanándose el comprador a perderlas, o el vendedor a devolverlas duplicadas.“ – If arras or a deposit have been given under the purchase contract, the contract may be rescinded by the buyer forfeiting them, or by the seller returning them doubled.

Two things are contained in this sentence that regularly get overlooked in advisory practice. First: „doubled“ refers to the total amount, not a surcharge on top. The seller pays out the deposit twice – but half of that is your own money, which would come back to you anyway. Your compensation is one deposit, not two. Mirror-image: withdrawing costs the seller one deposit, not two – he is already holding the first one. The calculator above therefore shows, for each side, what flows, which part of it is your own money, and what remains net.

Second: the provision assumes that the arras have actually been paid (si hubiesen mediado). Anyone who has signed but not yet transferred the money stands on different legal footing – which is why the calculator asks about this.

Arras confirmatorias – the confirmatory deposit

Here the deposit is simply a first payment towards the purchase price and confirms a contract that has already been concluded. There is no right of withdrawal. If one side fails to perform, the other may, under Art. 1124 Código Civil, choose either to demand performance or to rescind the contract – in both cases plus damages. This damage is the damage actually incurred; it may be smaller than your deposit, but it may also be larger. On rescission, the parties are put back into their original position and the damage is set off against this. Instead of rescinding, the court may also grant an additional period for performance.

Arras penales – the contractual penalty

The arras penales act as a contractual penalty (cláusula penal). Under Art. 1152 Código Civil, the penalty replaces compensation and interest, unless otherwise agreed. What matters is Art. 1153, though: the debtor cannot free himself from the contract not by paying the penalty, unless this right has been expressly granted to him – and conversely, the creditor cannot demand both at once, performance and penalty, unless this has been clearly granted to him. The other party must therefore choose. A reduction of the penalty by the court is only provided for under Art. 1154 if the main obligation was partially or defectively fulfilled; in the case of a clean withdrawal before any performance, it does not apply according to the wording.

The option contract (contrato de opción de compra)

From the buyer's perspective, the option contract is the strongest instrument: the buyer receives the unilateral right to complete the purchase within the option period; the seller is bound during this time and cannot sell to third parties. The option premium is credited towards the purchase price upon exercise; if the option is not exercised, it lapses. Because the buyer can insist on performance here, the option contract is particularly common for highly sought-after properties.

Note: In Mallorca, these terms are often used loosely in everyday life. What matters is not the heading of the document, but its content. If it merely states "arras" without further specification, the classification is a matter of interpretation – and this is precisely when having your own lawyer pays off the most.

How it's calculated

The calculation itself is simple, and the calculator makes it transparent:

1. Deposit = purchase price × agreed percentage. There is no statutory amount; Art. 1255 Código Civil leaves this in the hands of the parties. The calculator's default setting is market practice, not law.
2. Balance payment at the notary = purchase price − deposit. The calculator forms it as a difference, not as a second percentage – otherwise, with odd amounts, both parts together would result in one cent more than the purchase price.
3. Seller's repayment in the case of arras penitenciales = deposit × 200%. It is the deposit actually paid that is doubled, not the purchase price.

For the other two types of contract, the calculator deliberately shows no amount. This is not a missing feature: compensation under Art. 1124 is based on the actual damage, and any figure at this point would be invented. A zero there would represent the opposite of the truth.

Special cases that tip the amount

Financing condition (condición suspensiva)

If the purchase is subject to the condition precedent of a financing commitment and the bank declines, the obligation to purchase does not arise; what has been paid is returned (Art. 1114 Código Civil). Without such a clause, you lose the deposit even if the financing falls through. It belongs in the contract before signing, not afterwards.

Escrow account instead of direct transfer

The deposit should go into an escrow account held by an independent lawyer, tax advisor or notary – not directly to the seller or estate agent.

New build and off-plan

When buying from a developer (sobre plano) further payments follow in construction instalments. These instalments are not arras: the doubling rule of Art. 1454 only applies to the payment agreed as arras. Construction instalments must be secured by a bank guarantee from the developer – without it, total loss is threatened in the event of insolvency. Insist on this in writing.

If the deadline has already passed

The calculator assumes that the contract has not yet been put into effect – no handover, no payments beyond the arras. If the agreed notary appointment has already passed or has already been fulfilled, the situation must be assessed differently; this then belongs in the hands of a lawyer.

Deadlines, forms and the path to the escritura

Unlike the taxes surrounding the purchase, there is no form and no statutory deadline here. The deadline until notarisation is set out in your contract – it is negotiable, and setting it too tight is one of the most common mistakes. The path typically runs as follows:

1. Property found, price negotiated – verbal agreement with the seller or estate agent.
2. Reservation contract – take the property off the market, pay a small fee.
3. Due diligence – check the land registry extract (nota simple), clarify any encumbrances (check the land registry), energy certificate request it.
4. Apply for a NIE – without a Spanish tax identification number (NIE) no purchase is possible.
5. Arras or option contract – pay the deposit, set deadlines and conditions.
6. Secure financing – Mortgage in Mallorca if necessary.
7. Calculate purchase-related costs – see Purchase-related costs in Mallorca.
8. Prepare the notary appointment – all documents complete, choose a notary (Notary Spain).
9. Sign the escritura – the notarised purchase contract.
10. Land registry entry – only now are you legally secured as the registered owner.

A preliminary contract is legally valid in Spain without any particular form – a private written agreement is sufficient. However, you can only get into the land registry (Registro de la Propiedad) through notarisation, and without registration you are not protected against further dispositions by the still-registered previous owner.

What must be stated in the arras contract

1. Full identification of both parties, including NIE number
2. Precise description of the property (cadastral reference, land registry number)
3. Agreed purchase price
4. Amount of the deposit – and explicitly, which type of arras has been agreed
5. Payment method and account number, ideally an escrow account
6. Deadline until notarisation
7. Penalty clause (cláusula penal) and its amount
8. Conditions under which withdrawal is possible without loss, for example in case of failed financing

The most common mistakes

1. Contract type not understood

The difference between a reservation agreement, arras penitenciales and arras penales determines whether backing out comes at a price or whether you can be held to the purchase. Anyone who signs a document headed “Reservation” that in substance agrees a penalty clause has committed themselves differently than they think.

2. Paid directly to the seller

For larger amounts, the deposit should go into an escrow account.

3. No withdrawal clause for financing falling through

Without a condición suspensiva a rejected mortgage is your problem, not the seller's.

4. Land registry not checked in advance

Anyone who signs without having seen the land registry extract may be reserving a property with encumbrances.

5. Deadlines set too short

With a complicated document situation or an ongoing financing application, you can otherwise run out of time – and lose the deposit due to a deadline you signed yourself.

6. No independent lawyer

The estate agent's lawyer does not represent your interests. Your own abogado checks the contract before signing – see Lawyer for property purchase.

7. Blind trust in the translation

The Spanish version is legally binding. Discrepancies between the translation and the original are at your expense.

Checklist before signing

• Land registry extract (nota simple) is available and has been checked by a lawyer
• Land registry extract available, area and use match
• Contract type explicitly named: reservation, penitenciales, confirmatorias or penales?
• Penalty clause (cláusula penal) read and its amount understood
• Withdrawal clause agreed for financing failure
• Deposit goes into an escrow account
• Deadline until the notary appointment set realistically
• NIE number available
• Your own, independent lawyer has reviewed the contract
• Purchase incidental costs calculated and liquid funds available
• For new-build: developer's creditworthiness and bank guarantee for the deposit checked

Taxes around the preliminary contract

Signing a reservation or arras contract does not, in itself, trigger any tax liability; the tax burden arises upon the purchase. Which tax applies depends on whether you are buying from the developer or on the resale market – you can calculate the amounts using the calculators for the Property Transfer Tax (ITP) or for VAT and AJD on new-build purchases, and the total cost using the Purchase incidental costs.

Legal basis and status

The Spanish Código Civil is decisive:

• Art. 1454 – arras and their return in double amount
• Art. 1124 – right to choose between performance and rescission, with compensation for damages in both cases
• Art. 1152 to 1154 – contractual penalty, its relationship to performance and its judicial reduction
• Art. 1114 – conditions precedent
• Art. 1255 and 1258 – freedom of contract and binding effect

The legal status shown by the calculator is the entry into force of the Código Civil in 1889. This is not a display error: Art. 1454 has remained unchanged since 1889. The market figures given on this page – typical deposit amounts and reservation fees – are, by contrast, observations from current market practice and not legal provisions.

Does state or Balearic law apply on Mallorca?

A legitimate question, because the Balearics have their own civil law (Compilación del Derecho Civil de las Illes Balears), which takes precedence over state law in areas such as inheritance and family law. Under Art. 13.2 of the Código Civil, the Código Civil applies in these territories as derecho supletorio – as a fallback law where the regional (foral) law does not provide regulation. The Compilación contains no special provisions on arras or preliminary contracts. Your arras contract on Mallorca is therefore governed by the Código Civil, just as it would be on the mainland.

Conclusion: Which contract should you choose?

The reservation contract is suitable if you want to quickly secure a property and buy yourself a few days' time, without exposing yourself financially to a great extent.

The arras penitenciales are the standard for a serious purchase: both parties are bound, and both can withdraw at a price known in advance. This is the only one of the three variants for which the calculator above can give you a reliable figure for the cost of withdrawal.

The option contract gives you, as the buyer, the strongest position, because you can insist on performance.

And in all three cases, the same applies: have the contract reviewed by an independent lawyer before you sign. You can find the full process in the guide on the legal process of property purchase.

Official sources

• Spanish Civil Code (Código Civil) – Art. 1445 et seq. (compraventa), Art. 1454 (arras), Art. 1124 and Art. 1152–1154: https://www.boe.es/buscar/act.php?id=BOE-A-1889-4763
• Registro de la Propiedad (Spanish Land Registry): https://www.registradores.org
• Agencia Tributaria de las Illes Balears (ATIB) – taxes on property purchase: https://www.atib.es
• Agencia Estatal de Administración Tributaria (AEAT): sede.agenciatributaria.gob.es
• Consell de Mallorca – Urbanisme i Habitatge: https://www.conselldemallorca.net
• Statistics portal of the Spanish notaries (transaction data for the Balearic Islands): https://www.notariado.org/liferay/web/cien/sala-de-prensa/noticias

Frequently asked questions

Related calculators

• Purchase incidental costs in Mallorca – what is payable in total besides the purchase price
• Property Transfer Tax (ITP) Mallorca – the tax due when buying a resale property