When you put a property up for sale with an estate agent in Spain, it’s crucial to carefully review the agreements made with the agent. Be aware that the role of an estate agent in Spain differs from that in the Netherlands. Anyone can become an estate agent in Spain. Certain certifications are relatively easy to obtain, meaning they do not necessarily guarantee quality.
Most estate agents will sign an agreement with the seller outlining the terms between the parties, such as the agent’s fee, exclusivity, and specific conditions for the transfer of the property.
When the agent finds a buyer, a reservation agreement is typically signed with the buyer. This agreement sets out the basic terms for the transfer, and a deposit is paid. At this point, the agent becomes the “escrow holder” of the deposit and assumes related responsibilities.
Once the reservation is signed, the buyer and seller are given time to work out and finalize the terms of the transfer in a purchase agreement. In the Netherlands, this is often referred to as a “preliminary purchase agreement.” Until then, the deposit remains in the escrow holder’s account (usually the agent).
The escrow holder is responsible for the funds received and cannot return them to the buyer without the seller’s consent, as the deposit at this stage belongs to the seller.
When the buyer and seller agree on the terms of the transfer, the purchase agreement is signed, and the buyer will make a larger deposit. The seller is then given time to meet the agreed conditions leading up to the transfer date at the notary’s office.
However, if no agreement is reached, the reservation agreement and the reason for the failed transfer must be carefully reviewed:
- If the seller backs out, the buyer is entitled to a refund of the deposit;
- If the buyer backs out without a valid reason, the buyer will not get the deposit back. The contract between the seller and the agent should clarify whether the seller keeps the deposit or whether the agent is entitled to a portion of it.
What Constitutes a Valid Reason for the Buyer to Back Out?
First, the reservation agreement must be examined. Does it already outline specific conditions that the seller must meet? In some cases, the agreement includes a financing contingency, allowing the buyer to get their deposit back if financing falls through.
The reservation agreement may also require the seller to provide certain documents for the transfer or to update the property description in the Registry to reflect the actual square meters (e.g., registering a swimming pool). If the seller refuses to comply, the buyer has a valid reason to back out.
The seller is, however, entitled to refuse any new conditions proposed by the buyer for the purchase agreement.
It is not uncommon for buyers to propose new conditions after signing the reservation agreement. Since these conditions were not included in the reservation agreement, the buyer cannot impose them on the seller.
For example, the buyer cannot demand that the seller registers a swimming pool or installs a new septic tank if this was not stipulated in the reservation agreement. Of course, the situation changes if illegal issues are involved that the seller refuses to resolve. In such cases, the seller can provide a certificate from the local municipality confirming that no penalty procedures are pending for illegal construction.
What Happens if the Parties Cannot Agree on the Purchase Agreement?
If the parties cannot reach an agreement on the terms of the purchase agreement and there is a dispute over the deposited reservation amount, the deposit must never be returned to the buyer without the seller’s consent. At this stage, the deposit is considered the seller’s money.
The escrow holder is obligated to keep the funds in their account until the parties reach an agreement. In case of doubt, the escrow holder may deposit the funds with the court for resolution.
Ilonka Dekker