Although there is no legal obligation in Spain to have sales-purchase contracts notarized, it is nevertheless highly recommended to do so.
When buying real estate a private contract is usually signed before issuing the public sales-purchase deed (escritura de compraventa).
In general there are three types of written sales contracts:
1. RESERVATION AGREEMENT
In case of a spontaneous interest in a property, this may be blocked for a short time by signing a reservation contract and by paying a small reservation fee. In case of the actual purchase this reservation fee is deducted from the agreed purchase price.
In case the purchase does not go through the seller usually keeps the reservation fee.
If you have powerfully negotiated the purchase price, this kind of contract is not recommended. Should another buyer in the meantime make a much higher offer, this could lead to conflicts and your rights would then have to be enforced by long-lasting legal battles.
2. OPTION CONTRACT
By means of the option contract the seller agrees not to sell the property to third parties within an agreed period and to sign the public sales-purchase deed after payment of the remaining purchase price.
The buyer pays a customary deposit of 10% of the purchase price.
The conclusion of such a preliminary contract is particularly attractive for those who need more time to finalize the purchase (usually 4-8 weeks), but want to secure their dream property.
However, should the buyer not be able to finalize the purchase on the agreed date, he loses his down payment to the seller and from this moment the seller is free to sell his property to a third party.
On the other hand, in case the seller does not comply, eg. because he has found another buyer who pays more, he must pay the buyer he signed the option contract with, double the amount received, ie. 20 % of the purchase price, as liability for damages.
This type of contract is recommended, as both parties would suffer a financial loss as a result of failure to comply.
3. PRIVATE CONTRACT
The private purchase contract is structured very alike the option contract.
The seller agrees not to sell the property within an agreed period to third parties and to sign the public sales-purchase deed after payment of the remaining purchase price.
The buyer also pays a customary deposit of 10% of the purchase price.
Should the buyer not be able to finalize the purchase on the agreed date, the seller may sue for the completion of the contract.
In case the seller does not want to comply with the contract, because he has e.g. found another buyer, he can’t do so, because he is legally bound to carry out the contract.
This type of contract commits both parties to the definitive purchase / sale.
It is recommended, for example, for buyers who have so powerfully reduced the sales price that the there is a risk that a third party wants to acquire the property at a much higher price.
ELEMENTS OF THE CONTRACT:
These contracts should generally contain the following key elements:
– Rights and obligations of the parties
– Description of the purchase object and its ownership
– Purchase price
– Payment terms
– Handover date
– other arrangements between buyer and seller
VERIFICATION BEFORE SIGNING
The following documents should be checked before you sign one of the private written contracts referred to :
– up to date register extract (nota información registral), where you find information regarding ownership, as well as encumbrances, right of residence or right of way
– Registration in the cadastre
– In case the seller is not the owner of the property, he must have a notarized Power of attorney that authorizes him to sell.
– Current contracts or receipts of utilities (water, electricity , other)