For many years developers based in Spain, both homegrown and foreign, invested heavily in the Kingdom of Morocco as a result of this country’s drive to promote a second home market, all under the umbrella of Plan Azur 2010, an ambitious government sponsored infrastructures programme to facilitate this.
At first, some of these developers financed themselves in the traditional way, that with construction and project finance from a bank back in Spain, even if the collateral for the loans were in a different country.
The major developers had, in those boom years, no difficulties in obtaining funding, basically because they had other assets in Spain to back it up.
However, the problem arose with the smaller and foreign developers operating from Spain. These had little or, no assets making the granting of loans difficult, especially for construction in a different land.
To build in Morocco, these developers had to do it through a Moroccan subsidiary, an S.A.R.L, but in many cases, these companies were merely a vehicle for their day to day with the bulk of the activities were in Spain, and as we shall see later, most of their banking, which has become key in this Moroccan angle.
The mechanics to receive client’s deposits for off plan property in Morocco was simple, most simply came to Spain. This, despite that Morocco’s exchange control regulations quite clearly says that all funds to invest in property in their country had to be channelled through it. If these procedures are not followed, in the eventual case of a future sale of the property, the vendor would find it impossible to repatriate funds to their countries of origin.
Unfortunately, there is NO proof in most cases, and with most developers of this type, that funds were received in Morocco. In fact, in my opinion, the little funds that managed to get there was just enough to pay salaries, taxes and suppliers, and not necessarily to officially declare client’s investments.
Another curious angle is how foreign buyers used their Spanish based lawyers to channel payments to the developer. This would have been fine if the lawyer had sent the transfer to Morocco, but somehow, these transfer almost all ended up in the developer’s account in… Spain. Here we have a doubled edged scenario of a well-intentioned lawyer following the developer’s disposal instructions of funds when they should have known that this was not the right procedure.
To be continued
Law 57/68: Permits buyers of off-plan property to directly make a claim to all those banks (not developers) who take in buyers deposits as long as the property is not finished or in all those cases where the property is finished but the contract is resolved before a final occupation licence is issued by the local authorities and/or that the buyers have been required to complete (and the property is not of the contracted standard).
Interpretation of this law has been perfected by the Supreme Court and it’s systematically applied in cases where there is a bank guarantee (general or individual) in favour of the buyer or where there is no such document.
It’s a technical legal procedure that requires the participation of a specialised legal firm with a wide knowledge and experience of civil and banking procedures.
Fernando Salmerón, August 2019.
LAW 57/68 NEW DEVELOPMENTS
A little over a year ago I wrote about a peculiar old law in Spain that could come very handy for those Moroccan Real Estate developers who channelled their money through the Spanish Banking System, whether it was to the developers themselves or the client’s lawyers.
There have been considerable developments since then and in the next few weeks I will be posting here with full fully and will try to guide the reader through the details and offer all the legal angles available.
Suffice to say for now that we are concerned here only with those Spanish developers who built in Morocco through a Moroccan subsidiary and only in those cases where client deposit was transferred to Spanish accounts
As I will be gradually deciphering this law in plain English, I think that the best thing would be to follow the blog for the next few weeks and you will be ongoingly notified automatically.