Reservation Contract vs Private Purchase Contract in Spain: What Property Buyers Need to Know

Reservation Contract vs Private Purchase Contract in Spain: What Property Buyers Need to Know

Buying a property in Marbella often involves several documents before the final deed is signed at the notary.

For international buyers, the terminology can be confusing.

You may hear:

offer

reservation agreement

reservation deposit

arras

private purchase contract

public deed

These documents do not all mean the same thing.

More importantly, the financial consequences of signing them can be very different.

A buyer should therefore understand exactly what is being signed, what money is being paid and under what circumstances that money can be recovered.

The Typical Marbella Buying Process

Every transaction can be structured differently, but a common sequence is:

1. Buyer makes an offer.

2. Seller accepts the commercial terms.

3. Property is reserved.

4. Buyer’s lawyer performs legal due diligence.

5. Parties sign an arras or private purchase agreement.

6. Buyer pays the agreed deposit.

7. Remaining preparations are completed.

8. Purchase completes before the notary.

Not every Marbella purchase follows all of these stages.

Some transactions move directly from accepted offer to a private purchase contract.

Others use a short reservation agreement first.

The document itself matters more than the name placed at the top of it.

What Is a Reservation Agreement?

A reservation agreement is usually an early-stage private agreement used to remove a property from active marketing for a limited period.

The buyer normally pays a relatively small reservation amount.

The objective is generally to give the buyer time to:

• appoint a lawyer;

• conduct legal checks;

• review documentation;

• negotiate or prepare the main purchase contract.

In Marbella and across the Costa del Sol, reservation agreements are commonly used by estate agencies and sellers.

However, there is no single universal Spanish reservation-contract template.

The terms can differ substantially.

How Much Is a Reservation Deposit?

There is no universal statutory reservation amount.

The amount depends on:

• property price;

• seller;

• agency;

• transaction;

• agreed terms.

For some transactions it may be a few thousand euros.

For high-value property, it can be higher.

The important question is not simply how much is being paid.

It is:

Under what circumstances will the money be returned?

Is a Reservation Deposit Refundable?

Sometimes.

But buyers should never assume that it automatically is.

The reservation agreement should clearly explain what happens if:

• legal due diligence identifies a problem;

• financing cannot be obtained;

• the seller withdraws;

• the buyer changes their mind;

• the parties cannot agree the subsequent contract;

• an agreed deadline is missed.

If an issue is important to the buyer, it should be addressed explicitly in the document.

Reservation Subject to Legal Due Diligence

For buyers, one of the most important protections can be making the reservation subject to satisfactory legal due diligence where the seller agrees to this structure.

The buyer's lawyer may need to investigate:

• ownership;

• Land Registry information;

• mortgages;

• charges;

• debts;

• planning status;

• licences;

• community fees;

• property taxes;

• alterations.

If the reservation agreement does not address what happens when a material legal problem appears, disputes can arise.

What Is an Arras Contract?

An arras contract is a private pre-contract commonly used in Spanish property transactions.

A sum of money is paid toward the agreed purchase price as evidence of the parties' commitment.

The Junta de Andalucía describes the arras agreement as a private pre-contract through which money is delivered as security for the agreed purchase and subsequently deducted from the final price.

But there is an important complication:

not every arras agreement has the same legal effect.

Different Types of Arras

Spanish practice distinguishes several forms of arras.

The wording of the contract is therefore extremely important.

Arras Confirmatorias

These generally function as confirmation that a binding sale agreement has been reached and the amount paid forms part of the purchase price.

They should not automatically be interpreted as giving either party a simple right to walk away.

If one party breaches the contract, the consequences may involve claims for performance, termination and potentially damages depending on the agreement and circumstances.

Arras Penitenciales

This is the form many international property buyers have heard about.

Article 1454 of the Spanish Civil Code provides that where the parties have agreed qualifying arras allowing withdrawal, the buyer can withdraw by losing the deposit and the seller can withdraw by returning double.

However, buyers should not assume that every payment labelled “deposit” or even every reference to “arras” automatically creates this right.

The wording and clear intention of the parties matter.

Arras Penales

These can operate as an agreed penalty for breach.

Their precise consequences depend on the contract.

Again, the terminology alone should not replace legal review.

Why the Type of Arras Matters

Imagine a buyer pays €100,000.

If the agreement clearly establishes arras penitenciales, the contractual exit mechanism may involve the buyer losing that amount if they withdraw, or the seller returning double if the seller withdraws.

Under a different contractual structure, however, the consequences of breach can be entirely different.

The buyer cannot therefore safely conclude:

“I am paying 10%, so I can always walk away and lose only the deposit.”

That depends on what was actually agreed.

What Is a Private Purchase Contract?

A private purchase contract — often called a contrato privado de compraventa — is a more comprehensive agreement between buyer and seller establishing the terms of the sale.

It typically identifies:

• buyer;

• seller;

• property;

• purchase price;

• deposits already paid;

• payment schedule;

• completion date;

• property condition;

• furniture where applicable;

• responsibilities of each party;

• consequences of breach.

A private property contract can create legally binding obligations even though the final public deed has not yet been signed before the notary.

Does a Property Purchase Have to Be Signed Before a Notary to Be Valid?

Not necessarily.

Spanish law generally allows considerable freedom regarding the form of a property sale agreement.

A private contract can therefore be legally valid between the parties.

In practice, however, property purchases are normally completed through a public deed before a Spanish notary.

The public deed is also fundamental to the process of registering ownership at the Land Registry.

For an international buyer, the practical lesson is important:

do not assume a document is harmless simply because it has not been signed before a notary.

A private document can carry substantial legal obligations.

Reservation Agreement vs Private Purchase Contract

The simplest distinction is usually:

Reservation Agreement

Often used at the beginning.

Usually:

• smaller payment;

• shorter duration;

• property temporarily removed from market;

• legal checks begin.

Private Purchase Contract

Usually represents a much more advanced commitment.

Typically:

• larger deposit;

• final commercial terms established;

• completion date agreed;

• contractual remedies defined.

However, the title of the document is not decisive.

A detailed “reservation agreement” can create significant obligations.

A poorly drafted “private purchase contract” can create uncertainty.

The actual clauses determine the legal effect.

Reservation vs Arras

These are also often confused.

A reservation agreement normally exists primarily to hold the property temporarily.

An arras agreement normally represents a stronger contractual commitment toward the purchase.

But in real Marbella transactions, documents can combine characteristics of both.

That is why buyers should avoid focusing only on terminology.

Instead ask:

What exactly happens if I do not proceed?

What happens if the seller does not proceed?

How Much Is Normally Paid at the Private Contract Stage?

A common structure in Spanish property transactions involves increasing the buyer's total payment to approximately 10% of the purchase price at the private-contract stage.

But this is market practice, not a universal statutory requirement applying to every sale.

The amount can be negotiated.

A buyer may already have paid a reservation deposit, which is then credited toward the agreed deposit.

For example:

Property price: €1,500,000

Reservation paid: €10,000

Agreed deposit at private contract: €150,000

Additional amount due at private contract: €140,000

Remaining purchase balance is then paid according to the contract, normally at completion.

Do Not Pay 10% Before Understanding the Legal Position

The move from a small reservation deposit to a substantial private-contract deposit is a major step.

Before reaching that stage, the buyer's lawyer should normally have reviewed the property's legal position to an appropriate level.

This may include checking the Land Registry to verify:

• ownership;

• mortgages;

• charges;

• easements or restrictions.

The Junta de Andalucía specifically recommends checking Land Registry information before formalising the transaction.

Community Fees

Where the property belongs to a community of owners, the buyer should verify whether the seller is up to date with community fees.

This is particularly important for:

• apartments;

• penthouses;

• townhouses;

• villas within urbanisations.

Community debts should be reviewed before completion.

IBI

The seller's position regarding Impuesto sobre Bienes Inmuebles — IBI should also be checked.

The latest receipt can help confirm the property's annual municipal tax and whether payments are current.

Planning and Building Issues

For villas in Marbella, legal due diligence can become more complex.

The buyer's lawyer may need to investigate:

• building licences;

• occupancy documentation;

• registered built area;

• extensions;

• pools;

• enclosed terraces;

• basements;

• guest houses.

The property physically visible during a viewing should not automatically be assumed to correspond perfectly with registered or planning documentation.

What If Due Diligence Finds a Problem?

The answer depends partly on what has already been signed.

Possible outcomes can include:

• seller correcting the issue;

• buyer accepting the position;

• price renegotiation;

• additional contractual protection;

• transaction ending.

Whether the buyer can recover money already paid depends on the contractual wording and the legal circumstances.

This is exactly why due-diligence conditions should be considered before paying significant amounts.

Mortgage Buyers Need Additional Protection

A buyer requiring financing should not assume that failure to obtain the expected mortgage automatically cancels the purchase without financial consequences.

If mortgage approval is essential, financing should be addressed expressly in the relevant agreements if the seller accepts such a condition.

Buyers should ideally obtain an early lending assessment before committing to a property.

Bank Valuation Risk

Mortgage approval and valuation are also separate issues.

A lender may approve the borrower financially but value the property below the agreed purchase price.

That can reduce the amount the bank is prepared to lend.

The buyer then needs more cash.

For buyers operating close to their financial limit, this should be considered before signing a binding contract.

Completion Date

The private contract should normally specify when completion is expected.

That date can be important for both parties.

The seller may need time to relocate.

The buyer may need:

• financing;

• international funds;

• NIE;

• power of attorney;

• banking arrangements.

The date should therefore be realistic.

Furniture and Contents

Marbella property is frequently marketed furnished.

If furniture forms part of the deal, the agreement should clarify what is included.

This is especially important for luxury villas where furniture, artwork and decorative items may be valuable.

Do not assume everything visible during the viewing will remain in the property.

Fixtures vs Furniture

Some items are obviously part of the property.

Others may not be.

Potential areas of disagreement include:

• designer lighting;

• televisions;

• outdoor furniture;

• artwork;

• gym equipment;

• wine storage;

• decorative mirrors.

For high-value furnished purchases, a detailed inventory can be useful.

What Happens Between Private Contract and Completion?

Once the main contract has been signed, the buyer and advisers normally prepare for completion.

Tasks may include:

• final legal checks;

• mortgage formalisation;

• transferring funds;

• preparing notarial documentation;

• calculating completion payments;

• arranging insurance;

• utility planning.

The seller may also need to provide updated certificates and clear any agreed charges.

Final Completion at the Notary

The transaction normally concludes with execution of the public deed of sale before a Spanish notary.

At completion:

• the remaining price is paid according to the agreed structure;

• the deed is executed;

• possession is generally transferred;

• keys are handed over.

The ownership change is then processed for registration at the Land Registry.

Private Contract vs Public Deed

These documents perform different functions.

Private Contract

Defines the contractual relationship between buyer and seller before final completion.

Public Deed

Formalises the property transfer before a Spanish notary and provides the basis for Land Registry registration.

The private contract should therefore not be dismissed as merely preliminary paperwork.

It can establish the terms that ultimately govern the transaction.

What If the Seller Changes Their Mind?

The answer depends on the agreement.

Under expressly agreed arras penitenciales falling within Article 1454 of the Civil Code, a seller withdrawing can be required to return double the arras.

Under other contract structures, the buyer's rights may be different and could potentially include seeking enforcement or other remedies.

There is no safe universal answer without reading the contract.

What If the Buyer Changes Their Mind?

Again, it depends on the agreement.

With validly agreed arras penitenciales, withdrawal by the buyer may involve losing the arras.

With other contracts, simply walking away may amount to contractual breach and create additional consequences.

That is why a buyer should understand the exit mechanism before signing.

When Does the Property Come Off the Market?

This should be written into the reservation or purchase agreement.

The contract should clarify:

• when marketing stops;

• whether viewings stop;

• how long the reservation lasts;

• what happens if the next contract is not signed.

Do not rely only on a verbal promise that a property is “reserved.”

Who Should Hold the Reservation Money?

The agreement should clearly identify:

• recipient;

• account;

• purpose of payment;

• circumstances for release or return.

Depending on the transaction, funds may be handled by an agency, lawyer, seller or another agreed party.

The buyer should never transfer significant funds without knowing exactly to whom they are being paid and under what contractual basis.

Do You Need a Lawyer Before Reservation?

For a very simple, clearly conditional reservation, transactions sometimes move quickly.

But the buyer should have independent legal representation involved as early as possible.

This becomes increasingly important when:

• reservation amount is significant;

• wording is non-refundable;

• property has complex planning history;

• buyer requires financing;

• transaction value is high.

Buyer’s Lawyer vs Seller’s Lawyer

The buyer should normally have independent representation.

The seller's lawyer represents the seller.

The estate agent facilitates the transaction but does not replace the buyer's lawyer.

The notary is a neutral public official.

These roles should not be confused.

Common Mistake #1: Signing Because the Property Might Be Lost

Pressure can arise when multiple buyers are interested.

But urgency should not eliminate understanding.

A serious buyer can act quickly while still:

• reading the agreement;

• checking payment conditions;

• involving their lawyer.

Fast and careless are not the same thing.

Common Mistake #2: Assuming Every Deposit Is Refundable

It is not.

The document should specify the circumstances under which money can be returned.

Common Mistake #3: Assuming Every Deposit Means “Buyer Loses It / Seller Pays Double”

That outcome is strongly associated with arras penitenciales and Article 1454.

It should not automatically be applied to every reservation or private-contract payment.

Common Mistake #4: Thinking “Private” Means Non-Binding

A private contract can be binding.

The absence of a notary signature does not automatically make an agreement optional.

Common Mistake #5: Paying Before the Buyer Understands the Property

Do not let the paperwork move significantly faster than the due diligence.

A beautiful villa can still have:

• planning issues;

• unregistered alterations;

• charges;

• documentation discrepancies.

A Typical Marbella Example

Imagine a property agreed at:

€2,000,000

The parties might structure the transaction as follows:

Step 1 — Reservation

Buyer pays €10,000 under a reservation agreement.

The property is removed from active marketing for an agreed period while the lawyer completes initial checks.

Step 2 — Private Contract

The parties agree that the buyer's total deposit will become €200,000.

The €10,000 already paid is credited toward this amount.

Buyer therefore transfers an additional €190,000.

Step 3 — Completion

The remaining €1,800,000 is paid according to the agreement at completion.

This is simply an illustrative structure.

Different transactions can use different deposits and stages.

Another Example: Mortgage Condition

Imagine a buyer agrees to purchase for €1.2 million but needs substantial mortgage financing.

The buyer should not simply assume:

“If the bank says no, I get my deposit back.”

If financing is essential, the relevant contract should expressly address this if the seller agrees.

Otherwise the buyer may be contractually committed even though financing has failed.

What Buyers Should Check Before Signing a Reservation

Before paying, understand:

Who owns the property?

What exactly am I reserving?

How much am I paying?

Who receives the money?

Is it refundable?

When is it refundable?

When is it not refundable?

How long does the reservation last?

Will the property stop being marketed?

Is the agreement subject to satisfactory legal due diligence?

What happens if the seller withdraws?

What happens if I cannot obtain financing?

What Buyers Should Check Before Signing the Main Private Contract

Before making a substantial contractual commitment, understand:

Has ownership been verified?

Are there mortgages or charges?

Are community fees current?

Is IBI current?

Have planning issues been reviewed?

Does the physical property match the documentation?

What furniture is included?

What is the completion date?

What type of deposit is being paid?

What happens if either party fails to complete?

Are there any agreed conditions?

Reservation Contract vs Private Purchase Contract: The Key Difference

A reservation agreement is generally intended to secure the property temporarily while the transaction is prepared.

A private purchase contract usually represents a much deeper commitment to complete the sale.

But buyers should never rely on the document's title alone.

The legal effect comes from the content.

A two-page reservation document can still contain serious obligations.

A contract labelled “arras” can have different consequences depending on the type of arras actually agreed.

The Safest Principle for International Buyers

Before transferring significant money, be able to answer three questions:

What am I committing to?

Under what circumstances can I recover my money?

What happens if either party does not complete?

If those answers are not clear, the contract needs to be understood before it is signed.

Buying Property in Marbella With the Right Structure

The purpose of reservation and private contracts is not to make the buying process more complicated.

Used correctly, they create certainty.

They allow the buyer and seller to document:

• price;

• timing;

• deposits;

• conditions;

• responsibilities.

EQUA Estates works with international buyers across Marbella, Benahavís, Estepona and the Costa del Sol, coordinating the commercial property search and transaction process alongside each buyer's independent legal and financial advisers.

If you are preparing to reserve a property in Marbella, contact EQUA Estates to discuss the commercial terms and next steps before the transaction progresses.