{"id":68620,"date":"2026-07-29T09:01:21","date_gmt":"2026-07-29T09:01:21","guid":{"rendered":"https:\/\/perezdevargas.es\/?p=68620"},"modified":"2026-07-29T09:01:24","modified_gmt":"2026-07-29T09:01:24","slug":"deposits-in-property-sales-key-points-for-their-correct-legal-classification-in-the-light-of-case-law","status":"publish","type":"post","link":"https:\/\/perezdevargas.es\/en\/blog\/deposits-in-property-sales-key-points-for-their-correct-legal-classification-in-the-light-of-case-law\/","title":{"rendered":"Deposits in property sales: key points for their correct legal classification in the light of case law."},"content":{"rendered":"\n

1.- Types of deposit and legal consequences<\/span><\/strong><\/p>\n\n\n\n

In property practice, a deposit is an ancillary clause to a contract or preliminary contract of sale, consisting of the payment of a partial sum of money towards the agreed price, although it may serve various purposes. Thus, a deposit acts as a token intended to confirm the transaction, to ensure compliance with the contract by providing for the consequences of non-compliance or, where applicable, to establish a right of withdrawal with predetermined financial consequences.<\/p>\n\n\n\n

1.1.- Confirmatory earnest money<\/strong><\/p>\n\n\n\n

Confirmatory earnest money takes the form of a cash advance within the framework of a sale and purchase contract that has already been concluded, the purpose of which is to reinforce its existence and binding nature.<\/p>\n\n\n\n

In this case, the payment constitutes an act of performance of the contract, insofar as it fully binds the parties, without the possibility of unilateral withdrawal. Consequently, if one of the parties breaches the obligation undertaken, the other party may choose either to terminate the contract or to seek judicial enforcement of its performance<\/strong>, with the right, in both cases, to the corresponding compensation for damages, in accordance with Article 1124 of the Civil Code.<\/p>\n\n\n\n

In practice, what is described in the preceding paragraph means that the buyer cannot withdraw from the contract simply by forfeiting the sum paid, nor can the seller do so by returning double the amount received. Furthermore, the buyer\u2019s failure to pay does not automatically terminate the contract<\/strong>; rather, in accordance with Article 1504 of the Civil Code, the seller must first issue a formal demand through the courts or a notary, as until that point the buyer retains the right to pay and thereby avoid the termination of the contract.<\/p>\n\n\n\n

1.2. \u2013 Penalty deposits<\/strong><\/p>\n\n\n\n

Penalty deposits, for their part, are legally classified as penalty clauses, the function of which is to predetermine the amount of compensation payable in the event of breach<\/strong>, in accordance with Article 1152 et seq. of the Civil Code.<\/p>\n\n\n\n

As a general rule, such a penalty clause replaces any compensation for damages, as well as any interest that might be applicable in the event of breach. However, the parties, in the exercise of their contractual freedom, may agree that the penalty deposit is cumulative with the other remedies provided for by law.<\/p>\n\n\n\n

Notwithstanding the above, it is worth noting that penalty deposits do not confer on the parties the right to withdraw from the contract<\/strong>, insofar as they serve solely to establish in advance the damages arising from breach. Consequently, even where penalty deposits have been agreed, there is nothing to prevent a claim being made in court for specific performance of the contract.<\/p>\n\n\n\n

1.3. \u2013 Penitential deposits<\/strong><\/p>\n\n\n\n

The rules governing penitential deposits differ from those described above, as they constitute an express clause incorporated into the contract or preliminary contract of sale which entitles either party to withdraw from the agreement.<\/p>\n\n\n\n

Thus, the deposit incorporates a right of withdrawal<\/strong>. If one of the parties decides not to proceed with the contract, the other party cannot demand its performance. Instead, the agreed terms apply, which generally consist of the forfeiture of the deposit paid in the event of withdrawal by the buyer, or the return of double the amount received<\/strong> in the event of withdrawal by the seller.<\/p>\n\n\n\n

In this regard, the concept of withdrawal takes on particular significance in the context of penalty deposits, as either party may withdraw from the transaction without this constituting a breach of contract, subject to the application of the agreed financial consequence for exercising that right.<\/p>\n\n\n\n

Penitential deposits are the most common form of deposit in property sales<\/strong> and, furthermore, are the only ones expressly regulated in the Civil Code (Article 1454 CC). However, this does not mean that they are applied on a supplementary<\/strong> basis<\/strong>. On the contrary, their interpretation is restrictive, and the prevailing case law holds that, unless clearly stated otherwise, the deposit constitutes a mere indication of the conclusion of the contract and its binding nature for both parties. This is in line with both the general rules governing the breach of reciprocal obligations (Article 1124 CC) and the principle of the binding force of contracts.<\/p>\n\n\n\n

Thus, in the absence of certainty, the deposit is regarded as confirmatory: it does not confer the right to withdraw freely from the contract, but rather reinforces the binding nature of the agreement. Only when expressly agreed may it function as a penalty deposit, that is to say, as an exception allowing either party to withdraw subject to pre-determined financial consequences.<\/p>\n\n\n\n

For this reason, the application of the regime governing penalty deposits requires an express agreement<\/strong> to that effect, clearly setting out their legal consequences; according to case law, a mere reference to Article 1454 of the Civil Code is not sufficient.<\/p>\n\n\n\n

2.- Case law of the Supreme Court<\/span><\/strong><\/p>\n\n\n\n

Supreme Court Judgment No. 270\/2025 (STS 726\/2025) is of particular practical relevance to the property sector, as it addresses a recurring issue within the sector: the correct legal classification of a private contract (pre-contract or contract of sale) and the different types of deposit.<\/p>\n\n\n\n

In the case in question, the buyer contended that a sale and purchase agreement had already been finalised (confirmatory deposit), whilst the seller argued that it was a contract or preliminary contract of sale and purchase with a penalty deposit.<\/p>\n\n\n\n

The nature of the contractual relationship and, specifically, the function attributed to the deposit, is decisive for the parties, insofar as it determines substantially different legal consequences regarding their rights and obligations, affecting both the enforceability of performance and the financial consequences of non-performance, as will be detailed in subsequent sections.<\/p>\n\n\n\n

That said, it is necessary to provide a more precise definition of the different types of deposit recognised by case law.<\/p>\n\n\n\n

In Supreme Court Judgment 726\/2025, the issue at stake was the interpretation of the contract, determining its legal classification and what type of deposit had been agreed.<\/p>\n\n\n\n

If it was a penalty deposit<\/strong>, as the Court of First Instance held:<\/p>\n\n\n\n