New rules are set to be implemented to secure infrastructure; open investments in health care assets and in hospitality assets; ease real estate transactions and financing; and rebalance sales. Investors can look forward to many new developments in the Moroccan real estate legal framework in 2014 and 2015.
New Evacuation Regulations
The Decree No. 2-14-499 dated October 15, 2014 is the general regulation concerning the safe construction of structures, as well as procedures intended to prevent any panic during fires or other emergencies. For example, the law stipulates preventative measures against fires by taking into consideration the materials used for construction and the design of the building, among other things. Such standards are detailed for various types of constructions, including:
• residential buildings;
• structures open to the public and with a height lower than 28 metres where persons (other than employees) are admitted to enter, either freely or not, or where opened or closed meetings are held;
• high-rise buildings, which are classified as those over 28 metres, or more than 50 metres for residential buildings;
• work places, which are defined as spaces accessible to workers, except if classified as a high-rise building or a public building; and
• classified establishments and facilities, which are facilities that may cause disturbances in residential areas, or health, security, sanitary, agricultural or environmental hazards or nuisances (e.g. plants, workshops and worksites). For each type of building, the decree describes and defines general security principles, classification, construction regulations, smoke control systems, layout rules and technical installations, as well as emergency and fire-fighting procedures. The decree may have an impact on real estate and construction in Morocco. Even if developers had already taken into account soft law rules to prevent risks related to fire and panic in a building, the decree now requires implementing a higher standard of security measures. Developers will need to include these new rules in their processes and costs. This decree is expected to help rebalance and develop the sophistication of the real estate market. It has been welcomed by users who are more and more powerful in the real estate market, as the supply of certain types of assets is in fact lower than the demand.
Opening Investments in Health Care
King’s Decree Dahir No. 1-15-26 dated February 19, 2015 promulgating Law No. 131-13 relating to medicine is a major step in the health care industry: It liberalises investments in health care assets. This law combines two concepts which at first appear to be opposed: the possibility for a commercial company to hold a clinic, and the ethical position that health care should not be a business. In its first article, the law emphasises the principle according to which health care activities shall never, in any way, be carried out as a business. “The doctor shall conduct his practice far from any influence: his sole motivations are science, his knowledge, his conscience and his professional ethic.” When it comes to the way that a clinic may be organised, the possibility of a commercial company being involved is provided for.
Under Law No. 131-13 on medicine, a clinic is a private health care establishment, the objective of which is to ensure diagnosis and care provision for patients, injured persons, and pregnant and parturient women for the duration that is necessary as required by their health status, as well as rehabilitative care as needed. As was the case under the former version of the law, similar establishments are considered to be clinics, such as radiotherapy centres and haemodialysis centres, among others. These clinics may have a for-profit purpose or not.
A clinic may be held by a natural person only if he/she is a doctor. A clinic may also be held by more than one doctor. In addition, a clinic may be held by a legal entity that is not for-profit. Lastly, a clinic may be held by a commercial company.
Commercial Operators
In the case of a clinic being held by a company that is not owned by doctor(s) or by a company that is held by doctor(s) and non-doctors, the responsibility for medical oversight shall be apportioned to a doctor who is registered with the professional association as a private practitioner. It is worth noting that according to the aforementioned rules, doctors may be shareholders, with non-doctors, in a commercial company holding a clinic. In a clinic that is owned by a commercial company, the management of non-medical affairs is performed by a qualified administrative and financial managers. Such managers shall not be doctors. Finally, the law provides that the bylaws of the commercial company holding the clinic shall, as a matter of nullity, not include provisions that:
• could be contrary to the provisions of the law and the decrees implementing the law; or
• could lead to a professional alienation of the doctors who are practicing in the concerned clinic. Law No. 131-13 relating to health care is now offering a wider variety of possibilities for investors to set up commercial holding companies for clinics. Aside from medical activity, such regulations will allow the clinics to include two other kinds of businesses: management and real estate. Management of the clinic could be the most difficult part, as professionals with the knowledge required for such management appear to be rare. Real estate in the health care segment is the area many real estate developers are willing to enter, even if a clinic is a very complex real estate asset due to the highly advanced technical facilities that are needed.
The new opportunities provided by these updated regulations have created much optimism about the liberalisation of the sector leading to better services for patients. This law could also potentially open up competition for the management of and real estate services for clinics. However, one advantage will be a better quality of care as medical professionals will be free to focus on patients’ health rather than the business side of their medical practice.
Investments in Hospitality Assets
On September 4, 2014, the government adopted a new draft law on hospitality, which has yet to be voted on by parliament. The draft law is inter alia creating a new kind of hospitality asset: the résidence real estate leaned residence is a residence located on a plot of land adjacent to a location that hosts a tourist establishment, composed of one or several housing units, held by one or several owners and the use of which is occasionally offered to customers.
The legal framework for real estate leaned residences allows owners of housing units, including villas or apartments, to rent their units to the manager of a classified tourist establishment, which must be within a close distance from the unit, for a duration that is freely determined between the two parties. The manager of the tourist establishment may then offer use of such units to the final customer. Such owners are free to use or rent their units for the duration they wish any time of the year. This regime is an improvement for the tourism sector in the country and should provide a strong legal basis for individuals, and especially foreign individuals, to investment in hospitality assets in Morocco.
Easing Real Estate Transactions
On October 23, 2014, the government adopted a draft law on collective real estate investment schemes ( organismes de placement collectif immobilier, OPCIs). The draft law had not yet been voted on by parliament as of mid-2015. According to the Moroccan Council for the Code of Ethics in Securities, OPCIs are needed to develop more sophisticated financing options in the real estate sector. OPCIs will also help to bridge the financial markets and the real estate sector, with the former always looking for new products and the latter requiring financing. This will lead to an increase in the number of assets on Casablanca’s stock exchange, for which volume and depth is lacking, and could thereby attract more foreign investors.
Eye on the Ball
The main purpose of an OPCI shall be investment in the construction or purchasing of real estate assets for the purpose of renting. OPCIs may purchase real estate assets directly or indirectly, including in future state of completion, and carry out any diligence necessary to operate the assets, including carrying out construction, renovation and rehabilitation works.
OPCIs may be also divided into several sub-funds. Each sub-fund is composed of specific titles which represent some of the OPCI’s assets. The sub-funds are submitted separately according to the provisions of the OPCI law. OPCIs may be created by the managing company as a fonds de placement immobilier, or real estate investment trust or as a real estate investment company (sociétés de placement of a company, are joint stock companies with a variable share capital. Shares of SPI are issued or bought in accordance with the relevant OPCI laws and management rules, as well as a specific liquidating value (net asset divided by the number of shares).
Regulations applicable to joint stocks companies are adapted to OPCIs, including:
• at the ordinary meeting of shareholders and the second extraordinary general meeting of shareholders decisions do not require a quorum;
• in the case of an increase in share capital, shareholders do not have a preferential subscription right;
• no legal reserve on benefits is required;
• no preferential subscription right is granted to shareholders;
• the amount of share capital may vary at any time;
• the minimum number of shareholders is three;
• the management company is the managing director of the SPI; and
• shares shall be fully paid when initially issued and shall be nominatives. OPCI are created by a management company which appoints a depository establishment and drafts the management rules of the concerned OPCI.
Nature of Assets
OPCIs may be composed of: • built real estate assets or assets to be built in view of being rented, and relating rights in rem;
• title on built parts of public domain;
• foreigners similar right in rem;
• debt instruments, sukuk, or sharia-compliant bonds relating to share capital in a real estate company;
• other debt instruments;
• liquid assets and shareholder loans; and
• other OPCI titles. Assets may be located in Morocco, free trade zones within Morocco or foreign countries. An OPCI shall comprise a minimum of 60% in real estate assets or in shares in real estate companies, and a minimum of 10% in liquid assets. A maximum of 20% of assets may be non-built lands for construction purposes.
Transparency & Valuation
In order to be successful, transparency regarding the real estate assets owned by OPCIs and their value is key. In this respect, valuations of OPCI assets shall be conducted by two independent real estate appraisers and certified by auditors. Valuations must include the assets contributed in kind when the OPCI was created that are provided under the OPCI’s management rules, as well as any other real estate assets and rights in rem. Valuation reports should be issued twice a year. The management company shall also weekly publish the net asset value and subscription price of shares.
Sales in Future of Completion
For many years, Moroccan law strictly regulated off-plan sales. Even so, most local developers do not comply with the legal regime as they consider it too restrictive for two reasons: no sums may be paid by the purchaser to the developer before the foundation is completed, and the developer shall provide the purchaser a repayment guarantee covering the developer’s default, as the purchaser does not own any part of the assets before they are fully completed. In 2015 the government adopted a draft law, the main provisions of which are the following:
• Off-plan sales must be performed in conformity with the legal regime as a matter of nullity of the concerned contracts;
• Many details on the assets should be provided for in the preliminary sales contract, such as a description of the asset, the approximate surface area of the asset and the price per square metres;
• The specifications book should be more detailed, for example, including a description and intended purpose of the project;
• The preliminary sales contract can be executed as soon as the building permit is obtained, and not after the foundations are completed;
• A reservation contract may be executed before the preliminary sales agreement, but after the construction permit it obtained;
• The price should be paid according to specific instalments: 5% upon executing the reservation contract, 5% upon executing the preliminary sales agreement, 10% when starting the works, 60% to be split during the construction works until the housing permit or completion certificate is obtained, and 20% when the keys are handed over;
• The amount of indemnities due to one party by the other may be up to 15% of the sales price (instead of 10%); and
• The purchaser may terminate the preliminary sales in case of late delivery without paying indemnity to the seller.
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