How do deposit contracts work: types and terms

It is the agreement made prior to the sale of a property, that binds both parties and establishes the consequences of noncompliance.

The deposit contract is the step preceding the process of buying or selling a property, prior to signing the public deed, in which both parties privately agree on the terms of the transaction. There are various types of deposit contracts, and at MR Gestió in Cambrils, we draught them and advise both the seller and the buyer to ensure a fair process.

When a real estate property is agreed to be sold, both parties must agree on how the process will be carried out, and the way to formalise this agreement and ensure that the transaction proceeds is to sign a deposit contract. This agreement is typically used to ensure that the property will not be sold to another interested party while the buyer seeks financing to complete the purchase. Since each deposit contract is drawn up according to the conditions agreed upon by both parties, the contract may include a clause that exempts the buyer from liability if he is not granted an adequate mortgage.

This contract requires the buyer to deliver a portion of the total price of the property as a purchase guarantee; the amount varies depending on the signatories, but it is typically between 5 and 15% of the price. Despite the fact that it is a private agreement that does not need to be recorded in any official registry, a breach of the deposit contract has legal ramifications for both parties.

Deposit for Penalty

This is the most common type of deposit contract and is governed by Civil Code Article 1454. The conditions, in this case, are that the deposit money is part of the sale price and that if the buyer breaches the contract, they lose the amount advanced, whereas if the seller breaches the conditions, they must pay the buyer double the agreed amount.

Deposit for Confirmation

The deposit money is considered part of the sale price in this case, but the consequences for noncompliance vary somewhat. It is ruled by Civil Code Article 1124, which states that if one of the parties intends to breach the contract and not proceed with the sale, the other may require them to do so or seek compensation for damages.

Deposit for Criminal Offense

This mode is defined by Civil Code Article 1152, which states that the deposit is not part of the total sale price and binds both parties to fulfil the contract as an obligation under the criminal justice clause. The deposit is the agreed-upon amount to compensate for damages if one of the parties decides not to proceed with the sale.

To formalise the sale, a maximum term is stipulated in all deposit contracts, regardless of their modality. This period is typically three months, but it can be extended if the parties agree at the time the contract is written.

The deposit document must include the personal information of all parties involved in the sale, specific data that identifies the property, the legal conditions under which the sale will take place and the delivery conditions of the property, the date on which the signature is made and the maximum date on which the sale must be completed, the consequences for breach of contract, the total price of the property, the amount of the deposit, and the type of contract, according to the contract.

At MR Gestió, we handle all of the procedures for selling a home and draught the contracts to ensure that the transaction goes smoothly. Our team will be happy to answer any questions you have about the steps involved in selling or buying a home.