The deposit contract is a document widely used in Spain when buying a property . Here are some aspects to keep in mind before signing it.
When buying a property in Spain, it is common for a deposit contract to be signed between the buyer and the seller. This document usually includes all the conditions of the sale, a deadline to sign the deed at the notary’s office and, in addition, implies the payment of a reservation signal by the buyer. The particularity of this document is that, being private, it is a free agreement between the parties and they can include in it all the clauses they consider appropriate, so there are certain details that are sometimes not taken into account. Next, we explain some aspects that we must consider when drafting or signing a deposit contract to sell a property in Spain.
1. The earnest money is defined by the regulations
The figure of earnest money appears in the Spanish Civil Code and the different types of earnest money contracts that exist have been defined by jurisprudence, so this document has full legal validity and provides legal security to each of the parties. Thus, the legal doctrine identifies three classes of earnest money: confirmatory, penal and penitential.
The most notable difference between these three contracts is that the first two do not allow the withdrawal of the agreement and it is possible that, in the event of a breach, the affected party is forced to sue to be compensated for the breach of the agreement. On the other hand, the penitential deposit contract does allow the withdrawal in exchange for the payment of a pre-established penalty.
In this sense, it is convenient to evaluate very well the type of contract that we should sign, since your choice can determine the type of scenario that we may face in the event that we or the buyer decides to back down with the sale. Thus, if we are not very sure of wanting to sell or we want to avoid being involved in possible litigation, it is advisable to opt for a penitential deposit contract. In fact, it is the one most commonly signed to sell a house in Spain.
2. It is necessary to indicate what type of contract it is and what the penalty is.
Although the earnest money is defined by jurisprudence, it is very important that, when drafting the earnest money contract, it is clearly specified what type is being signed. And it is that if it is not expressly indicated that, for example, it is a penitential deposit or the possibility of desisting from the sale is not mentioned, it will be legally understood, by default, that it is a confirmatory deposit, with the consequences that it brings (you cannot withdraw and the penalty to be assumed is not established).
Thus, to avoid that, in case of non-compliance, the other party sue us, it is advisable, in addition to indicating what type of contract it is, to specify in detail what penalty the person who breaks the contract has to bear. In this way, if we have decided to sign a penitential deposit, for example, we must clearly include that if the buyer is the one who gives up, we have the right to keep the deposit; and if we are the sellers who decide not to sell the house, we must return the reserve money to the other in duplicate.
Although this is the penalty already defined for the penitential deposit, we cover our backs even more if we indicate it in detail in the contract. In this way, there will be no room for possible subsequent legal interpretations.
3. The deposit contract can be extended.
On the other hand, it may happen that for some reason the deadline established in the contract is reached and that the deed has not yet been signed at the notary’s office. When faced with this scenario, many sellers or buyers may ask themselves: do I have to pay the penalty if, because of me, we have not signed on the deadline?
Actually, this depends on the will of the parties. If both want to continue with the purchase, it is convenient to know that this agreement can be extended and it is not necessary to sign a new contract to extend the period.
In fact, to extend the existing contract, it is enough to add an extension annex, signed by buyer and seller, indicating the new deadline to close the sale at the notary’s office, although it is advisable to also add what are the reasons that have caused the delay at the signing of the sale of the house.