The deposit contract when buying in Menorca: what it is and how it works

The deposit contract (contrato de arras) is one of the most important steps in buying a property in Menorca. Yet many buyers reach this stage without fully understanding what they are signing, what it commits them to, or what happens if the deal falls through.
Knowing this document in advance allows you to negotiate with confidence and avoid unexpected situations.

What is the deposit contract?

The contrato de arras is a private agreement between buyer and seller that reserves the property in exchange for a sum of money. It sets out the essential terms of the future sale: the price, the deadline for signing before a notary, and any other conditions agreed between the parties.

While not legally required, it is standard practice in the Spanish property market — and particularly in Menorca, where demand can be high and sought-after properties may attract multiple offers.

Types of deposit contract

There are three main types under Spanish law, each with different legal consequences:

Confirmatory deposit (arras confirmatorias)

This type signals that the contract is already binding. If either party fails to complete, the other may demand specific performance or compensation for damages — but there is no automatic fixed penalty. This is the least common type in property transactions.

Penal deposit (arras penales)

This acts as both a guarantee and a penalty in case of default. If the buyer withdraws, they forfeit the deposit. If the seller withdraws, they must return double the amount. This is the most frequently used type.

Withdrawal deposit (arras penitenciales)

This explicitly allows either party to withdraw from the deal by accepting the corresponding penalty: the buyer loses the deposit, the seller returns double. Unlike penal deposits, specific performance cannot be demanded — withdrawal is a recognised option for both sides.

In practice, most deposit contracts in Menorca are of the penal or withdrawal type. It is essential that the type is clearly specified in the document.

How much is the deposit?

There is no legally fixed amount. Standard practice in the Menorca property market is to pay between 5% and 10% of the agreed sale price.

This amount is deducted from the total price when the public deed is signed before the notary.

What should the contract include?

A well-drafted deposit contract should include at a minimum:

• Full identification of both buyer and seller
• Description of the property (address, cadastral reference)
• Total sale price
• Amount of the deposit paid
• Type of deposit (confirmatory, penal or withdrawal)
• Deadline for signing the notarial deed
• Specific agreed conditions (property condition, inclusion of furniture, etc.)
• Consequences in case of default

What happens if the deal does not complete?

• If the buyer withdraws: they forfeit the deposit paid.
• If the seller withdraws: they must return double the amount received.
• If the failure is due to circumstances beyond either party (for example, a serious legal issue with the property), the outcome will depend on what is expressly agreed in the contract.

This is why it is particularly important that the contract clearly sets out all conditions and grounds for cancellation.

Is a lawyer needed to sign the deposit contract?

It is not legally required, but it is strongly advisable. An independent lawyer can review the contract before signing, ensure the correct type of deposit is being used, and confirm that all conditions are properly captured.

For foreign buyers unfamiliar with the Spanish legal system, obtaining legal advice at this stage is especially important.

Conclusion

The deposit contract is the first formal commitment in a property purchase in Menorca. Signing it with full understanding, a well-drafted document and the right advice is essential for the transaction to proceed securely.
At Fincas Venalis, we support our clients from the very beginning — including this stage before the notarial deed.

More information: venalismenorca.com/en/