Do I have to sign a reservation contract when buying property in Spain?
When buying a property in Spain, once a price has been agreed between the buyer and seller, buyers are often asked to sign a reservation contract (known as Contrato de Reserva) and pay a reservation fee to secure the property. But do you have to sign a Spanish reservation contract? Are there any benefits to signing one? And what should you be aware of before signing a reservation contract in relation to property in Spain?
Are reservations contracts/reservation fees mandatory in Spain?
While reservation contracts are common when buying property in Spain they are not an essential part of the buying process in Spain. Estate agents like reservation fees as it commits you to the purchase and often Spanish estate agents will put pressure on you to sign a reservation contract and pay a fee as it means you will be less likely to back out of the Spanish property purchase once you have returned home. You do not have to sign a reservation contract, however, or make a reservation payment at all (despite what the agent may say!)
What are the benefits of signing a reservation contract in Spain?
Although it’s not essential to sign a reservation contract, it is common to do so in Spain. If you do choose to sign a reservation contract in relation to a Spanish property it usually ensures that the property is removed from the market for a set period (usually 30 days) and confirms the agreed sale price, which offers buyers some assurance that they will not ‘lose’ the property to another buyer. This can also give your Spanish lawyer time to run all the necessary background checks to ensure there are no issues regarding planning, land registry, debts attached to the property etc. whilst the property is ‘reserved’ for you.
You can skip the reservation contract stage altogether and, once the necessary checks have been made and your lawyer is satisfied that there are no risks regarding the property purchase, you can move straight to signing a purchase contract, which is the first legally binding step in the property buying process in Spain. However, the seller can decide to keep the property on the market during this if no reservation contract has been signed.
Can you negotiate the terms of the reservation contract?
It’s customary for Spanish estate agents to ask you to sign their own reservation contract but these contracts are often very vague and offer little protection to the buyer. However, they are not fixed and you have the right to negotiate the terms of the agreement if you choose to sign a reservation contract. This is something your Spanish lawyer can help with.
How much are reservation fees?
Typically, reservation fees are usually €3,000 to €6,000. This is not calculated, as such and typically the lower amount applies to low-value properties and the higher deposit applies to high-value properties (although not always). This fee is also negotiable though. It will usually be discounted from the agreed price for the property (do check though!)
Some estate agents insist that you pay a deposit of up to €6,000 simply to liaise with the vendor regarding an offer. So, always check with estate agents in advance if this is their policy. If so, we recommend avoiding them altogether!
Are reservation fees refundable?
You should be aware that once you’ve paid a reservation fee this money is usually non-refundable unless there is a valid legal reason for you to pull out of the property purchase. The purpose of a reservation fee is to make a buyer commit to the property purchase, so if you change your mind or find that you can’t raise the purchase funds after all, expect to lose this money. Only in exceptional circumstances, where the agent or seller has not been upfront about legal issues or there is a legitimate legal problem is discovered, is the deposit likely to be returned. This will however also depend on what was agreed in the reservation contact, which is why it is wise to ensure your independent Spanish lawyer looks over this and advised you in relation to it before you sign it.
It’s is therefore helpful to get organised and get in touch with a lawyer before you go on any viewing trips to ensure that you have the details of a reputable Spanish property lawyer at hand so that they can help you from the outset.
What should I know before signing a reservation contract?
If you do choose to sign a reservation contract, you should always seek independent legal advice before signing a reservation contract and/or paying a reservation fee. By independent we mean that the lawyer is not linked to the estate agent, developer or seller. This is to ensure that your lawyer is solely acting in your best interests to protect your assets.
It is advisable not to sign a reservation contract until a valuation of the property has been carried out, if necessary, you have secured a formal mortgage offer (if you require a Spanish mortgage) and the basic background checks have been run on the property by your Spanish property lawyer.
In summary, it is not usually in the buyer’s interests to pay a reservation fee as they do not offer them much protection, although they do offer an effective way of securing the property and agreed price for you. If you are dedicated to the purchase of the particular property and have all the funds in place etc. there is no reason why you should not sign a reservation contact, as long as your lawyer has confirmed they are happy for you to do so and you understand the implications of it.
While you may be keen to secure your dream property, consider all the legal and financial implications carefully before signing any paperwork and handing over any monies. Instructing a Spanish lawyer should be sufficient to show the seller that you are serious about buying the property!
Article published: August 1, 2018