Real Estate Morocco - Legal & Financial

Property Tax Morocco | Mortgages Morocco | Lawyers / Solicitors in Morocco

Buying property in Morocco

The purchase process of real estate in Morocco has three main steps, the first being the reservation of the property. The second step rules the relationship between Vendor and Purchaser and takes place with the signing of the private purchase contract, while the third and final step occurs at the signing of the title deeds on completion.

The Moroccan legal system makes use of the figures of the Public Notary and of the Land Registry as a must in order to obtain a secure ownership of a property.

Reservation of the property

Once the purchaser finds the desired property, it must be taken off the market. In order to do so, a holding deposit shall be made payable to the Owner, who shall sign a document in which the purchaser is given the option to purchase the property.

After this first step, all the necessary searches and investigations on the property have to be carried out by the solicitors of the Purchaser so to ensure that the property object of purchase is in the adequate legal condition, thus free of any charges, debts or encumbrances. In case of purchasing off-plan, your solicitor shall ensure to the best of his capabilities that the constructors are reputable and solvent.

In the event of finding any anomaly on the conveyance of the property, the holding deposit will be refunded to the purchaser before the signing of the private purchase contract occurs.

Once it is confirmed that the property is in perfect legal situation the purchaser can then proceed with the next step and the holding deposit will form part of the purchase price and therefore deducted from complete price.

Private Purchase Contract

A private purchase contract (Compromis du Vente) is a legally binding document that rules the relationship between owner and purchaser. It shall be drafted and explained by your solicitor and shall be signed by the two parties involved in the purchase.

This private contract shall set out the details of the agreement, as well as it shall establish the payment scheme to follow and the completion date for the property. It is advisable to have it signed before a Moroccan Public Notary.

At the signing of the contract the purchaser shall also put down a non-fundable deposit. In similar terms as to what is legally required in Spain or France, in Morocco developers shall provide with Bank Guarantees for the amounts paid to them

Nevertheless, it is essential both to work with reputable developers as well as to obtain the proper legal advice in order to minimize any risk.

Completion

Before completing, it is highly advisable to arrange for a Power of Attorney, thus granting your solicitors in Morocco with the faculties to act on behalf of the purchaser. Having Morocco a complex system full of formalities, this requisite is becoming essential when purchasing in this country.

Once the works on the property have been carried out, the signing of the Title Deeds (Compromis du Vente definitive) shall take place in the presence of a Moroccan Notary. The Notary is an official of the State, being his duty to certify that the contract has been correctly signed and that the purchaser and seller have been advised of their tax obligations.

Generally speaking, only those titles granted in front of a notary can be registered into the Land Registry Office, thus giving the purchaser full protection on the ownership of the property. Once the title deeds are fully registered and available for collection, then the Land Registry shall notify the solicitors of the purchaser.

Expenses

As a guideline, a purchaser in Morocco shall bear with the following expenses:

Transfer Tax (Droit d´Enregistrement) 2,5% of purchase price.
Land Registry fees 1% of purchase price.
Notary fees and Tax: Approx. 1,5% of purchase price.
Mortgage expenses, if applicable.
Legal fees

Utilities

Utilities of the property (electricity, water, etc.) are to be registered under your name. It is advisable to direct-debit your utility bills from your Moroccan bank account.

The bank account for non-residents should be a convertible account of Euros/Pounds into Dirhams. With this type of account those Euros or Pounds deposited will be converted automatically into Moroccan Dirhams.

Mortgages

A mortgage is a loan secured on your property, so the property acts as a guarantee for the repayment of the loan.

The terms for repayment can be agreed between parties (borrower and bank) depending on the amount of the transaction and on the qualification of the client, which shall be studied on a case by case basis.

How much I could borrow?

The maximum amount that a non-resident could currently borrow is in the order of 70% of the purchase price of the property. This loan will depend on the qualification of the client.

Types of mortgages:

Fixed interest rate loans. The advantage of this loan is that the monthly repayment amount is not affected whether the rates increase or decrease, therefore, the borrower will always pay the same monthly amount.
Variable interest rate loans. The monthly repayment instalment is affected by the interest rate change of the market.

Tax Summary

The main taxes that a Purchaser in Morocco will be the following:

Value Added Tax: This Tax is payable by the Developer if it’s not agreed the opposite it is established on the 14%.
Capital Gains Tax: It is established on the 20% of the net profit obtained, with a minimum of 3% of the purchase price. In case the purchaser becomes resident in Morocco he will not be liable to pay this tax if he holds the property for a minimum of eight years.
Income Tax: Non-residents are exempt of its payment for the first three years of ownership. Thereafter, it varies ranging from a 13% to a 44% and based on the 60% of the incomes.
Council Tax (Tax Urbaine): Non payable for the first five years, it then varies depending on a series of factors. Generally speaking it will then range between 300 € and 500 € a year but it will depend on the size and value of the property.
Tax d´Edilite: To be determined on a case by case, pending on local authorities. In case of residency, exemptions of up to 75% apply.

Maintenance expenses

Maintenance and management fees for the common areas and providing the common services. This expense will vary depending of the complex where the property is and the services provided on the resort.

Summary

Reasonable prices may sound very attractive for potential investors thinking of purchasing real estate in a Mediterranean country.

As elsewhere, receiving proper legal advice and working with well reputed developers shall also be a must so to undertake a smooth purchase in Morocco.

This article has been written by Pablo Rodríguez-Contreras

Martínez-Echevarría, Pérez & Ferrero Abogados
Centro de Negocios Puerta de Banús, Edf. D, 1ª Planta
C.N. 340, Km 175 - 29660 Nueva Andalucía,
Marbella - Málaga - Spain
www.legal-independence.com

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