Home improvements: A look at the regulations regarding real estate

With real estate a major part of the Moroccan economy, the country is continuously strengthening the sector’s legal framework, and has laws and regulations that cover a wide range of business law.

RECENT LEGISLATIVE EFFORTS: The rights in rem code & registration of real estate: At the end of 2011 the Moroccan legislator adopted the rights in rem code, modernising legal rights in rem which were formerly regulated by a 1915 dahir (decree).

The rights in rem code encompasses non-registered properties, and regulates the possibility of purchasing a real estate asset in possessing it for a certain duration (from 10-40 years). The rights in rem code also lists the rights in rem that exist in Morocco, whereas the statutes and regulations of many countries – including France – do not provide such a list. On the same date, the Moroccan legislator adopted a modification of a 1913 dahir on the registration of real estate assets with the land registry. The provisions of the 1913 dahir have been completely refreshed. For example, the prénotation mechanism (possibility for a person to obtain a mention on a land title providing for a claim on such land title) has been much restricted, with time limits and criminal penalties now applying in cases of abuse. Such restrictions answered the difficulties owners were facing when encountering abusive prénotation that commercially prevents land from being sold.

It is worth noting that two major principles of Moroccan real estate law have not been modified. First, the registration process of land that was not previously registered with the land registry removes all former rights on such land. This means that after the registration process of land, nobody may challenge the ownership right of the registered owner.

Second, registered rights in rem may not be transferred or modified without such transfer or modification being registered with the land registry: this means for example that even if the owner agreed in a valid sale and purchase agreement to transfer the ownership of a real estate asset to the benefit of the purchaser, such ownership transfer may only occur after the sale and purchase agreement has been duly registered with the land registry. Construction: More recently, the Moroccan government approved the General Regulations for Construction, which entered into force in December 2013. These gather various provisions to implement and to clarify procedures for obtaining allotment authorisations, building permits, housing permits, or compliance permits and town planning information. It creates a one-stop shop for requests for particular allotment or building permits, whereas the previous system involved many administrative bodies. The real estate market is welcoming this improvement with enthusiasm, believing that such simplification would ease the urban authorisation issuance process. In addition, the Ministry of Housing has issued a draft construction code that encompasses preliminary studies, clarification of the persons involved in a project, origin of the materials, prevention of risks associated with working sites, clarification of the 10-year guarantee and obligation to be covered by a 10-year insurance guarantee. Private state domain: Other legislative efforts are now in progress. For example, the private state domain – i.e. the properties that are owned by the state and that are not from the public state domain – is currently governed by laws and regulations, but also by internal administrative circulars that are not always accessible, or are not for the use of persons outside the administration. The public administration recently decided to launch a survey to define the private state domain and clarify its legal status, to update, complete, simplify and modernise the legal scheme and the procedures relating to the management of the private state domain, and draft and gather the related provisions according to a rational order. This work would result in the drafting of a private state domain code to be proposed to the parliament. Involvement of private actors & soft law: Real estate private actors are also deeply involved in the evolution of the legal scheme or in the adoption of soft law – law that is not mandatory but which is applied on a voluntary basis – aiming at improving real estate practices. For example, the National Association of Tourism Investors is a think tank which is very active in issuing ideas for stimulating investment in the tourism sector, and preparing the Ministry of Tourism to find realistic and pragmatic solutions.

Much thought has been given to how to improve tourism developments and make the business model viable, for instance. Another example is the creation in March 2014 of an economic interest group by four real estate brokers (Carré Immobilier, CBRE, JLL and Lance) called Statimmo Maroc. The group’s aim is to improve the transparency of the corporate real estate market for users and investors by publishing indicators on the rental market and on investment in offices and warehousing in Casablanca.

A last example relates to the National Federation of Real Estate Developers (Fédération Nationale des Promoteurs Immobiliers, FNPI). In January 2014 the FNPI created a quality label that may be obtained by developers for specific projects, depending on compliance with transparency, laws and regulations, technical requirements, insurance, health, security, innovation and sustainable development criteria. Housing & professional leases: The status of housing and professional leases was modified by Law No. 67-12, which entered into effect at end-February 2014. Numerous modifications and simplifications were made. For example, the amount of the guarantee deposit that may be requested from the tenant has been increased from one month’s rent to two. A procedure to recover the payment of rent has also been included. The possibility to revise the amount of the initial rent has been put in line with Law No. 07-03: revision every three years, of 10% for professional premises and 8% for housing premises.

VEFA: Other issues feature in the legal improvement targets. For example, the rules governing future completion sales (vente en l’état future d’achèvement, VEFA) are constantly discussed by developers and purchasers, as they do not correspond to the needs of the market. In mid-2013 the government adopted a draft law that would address several issues. For example, under the current provisions of the VEFA Law, the first contract that may be entered into between seller and purchaser is the preliminary sales contract, which may only be entered into after the foundations at ground level have been completed. Prior to this the market uses a reservation contract. The issue is that drafting a reservation contract often leads to the nullification of the sums that are paid under such reservation contract.

Under the new draft law, the preliminary sales contract may be executed after the construction permit is granted. This means the seller would lawfully be authorised to fund (with payment made by purchasers) its works from the day of obtaining the construction permit, instead of from completion of the foundations at ground level, as under the current version of the VEFA law.

Moreover, under the new draft law, a mandatory payment schedule would be provided, whereas the current version left the parties to freely decide the amount of each instalment. The schedule would be 5% at execution of the preliminary sales contract, 75% divided into three instalments until completion of the works and obtaining the completion certificate or the housing permit, and 20% when the keys are handed over. Finally, the early termination indemnity that may be due from one party to another would rise from 10% to 15% of the sales price.

OBG would like to thank Lefèvre Pelletier & associés and Romain Berthon, partner; Lina Fassi Fihri, partner; and Alain Gauvin, partner, for their contribution to THE REPORT Morocco 2014