Arras. In the sale and purchase of real estate, it is common that, before the deed is signed, the parties pay an amount on account: "The Arras"
Note: Remember that there are 3 types of deposit.
- Penitenciales: If they are a "arras penitenciales" (the most common), both the seller and the buyer can back out and withdraw from the operation. If the buyer does so, he loses the amount paid; and if the seller does so, he must return it doubled.
"Arras penitenciales must be expressly agreed, indicating the right of both the seller and the buyer to withdraw from the sale".
- Confirmatorias: Yes, the earnest money is "Arras Confirmatorias" if neither the seller nor the buyer can back out. Attention! If the date of the deed arrives and one of the parties does not appear, the other party can demand either the granting of the deed, or terminate the contract and recover the amount paid. In both cases, the aggrieved party may demand compensation for damages.
- Penales: If a "Arras Penales" is signed, the sale is also closed so that both the buyer and the seller can choose to force the other party to sign the deed. Note: But the compensation for damages to be paid by the defaulting party is fixed from the beginning: if the buyer defaults, he loses the amount paid, if the seller defaults, he must return it doubled.
If you want to sign a Arras Penales (so that you can back out if you wish), be aware that the Supreme Court has ruled that this type of deposit must be interpreted restrictively, and that it is necessary for the contract to clearly state the will of the parties to agree it. Attention! It is not enough for the contract to refer to article 1.454 of the Civil Code (which is the provision that regulates penitential deposits). Therefore, make sure that the contract expressly states that it is an Arra Penal and that either the seller or the buyer can the transaction with the consequences explained above.