The importance of granting a deed of deposit

At Illeslex Abogados, as experts in property law in Mallorca, we are aware of the importance of depositing the option down payment, which usually amounts to 10% of the total purchase price, in the escrow account of a notary’s office after signing a property option contract. This guarantees the buyer the certainty that he can get his money back without any problems if the seller finally decides not to sell the property or does not fulfil the necessary conditions of the purchase option contract. At the same time, the seller is also hedged, as he or she can be sure that the deposited amount will be paid out as compensation if the buyer violates or waives his or her option right. 

For this reason, we at Illeslex Abogados would like to stress the importance of signing a notarial deed of deposit. This document sets out the conditions that can be freely agreed by the parties for the repayment of the option down payment if one of the parties does not comply. It must be signed by both parties when the amount to be deposited is transferred before a notary.

If the option down payment is deposited in a notary escrow account and a deed of deposit is not signed, it is a unilateral deposit by the buyer. In this case, if at any time the buyer asks the notary to refund the amount, the notary must do so. And he must do so regardless of what was agreed in the purchase option contract because if the notary did not know of it, he is not obliged to comply with it. It could be that the buyer withdraws the option down payment without the seller being informed or having knowledge of it.

All agreements on what to do with the deposited amount in the event of a breach of the purchase option contract by the parties, which are not known to the notary, are not binding on him. However, what is agreed by the parties before the notary in the notarial deed of deposit is fully enforceable for him.

So if you want to make sure that both parties are reassured and that there are no surprises in the sudden disappearance of an amount you take for granted, provided that the option down payment will be deposited in a notary escrow account, we recommend that you sign a notarial deed of deposit. This enables a not one-sided and documented deposit, where both parties to the contract can precisely agree and determine the conditions for payment of the deposited amount, in whole or in part, to one or the other party.