Tag Archives: Taking Moroccan Developers to Court

PREFACE BY Sr. Fernando Salmerón, Bufete Salmerón, Sevilla (Spain):

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.

Le Jardin de Fleur (Saïdia) III

Recent article appeared in Diarmaid Condon’s celebrated site: http://www.diarmaidcondon.com
Diarmaid Condon is Ireland’s foremost Independent Property Consultant and journalist. He has been in the industry since 1995 and, in that time, has been a strong advocate for improved legal protection in the sector.

Newsletter Mar 2007 Web-1.jpgProperty Logic – Moroccan Developer

This piece of advice on the Moroccan market was very kindly written by Jorge Garcia Larios who is a property expert based in Melilla, a Spanish enclave in Morocco. It deals with the topic of developers that are experiencing financial difficulties but still maintain assets in the Kingdom of Morocco. The assets in question are usually in the form of land as most developers of unbuilt projects, at this stage, have little or no money.

One such developer is/was Property Logic Maroc S.A.R.L a subsidiary of Property Logic (Spain) based near Marbella in the Costa del Sol. The company’s flagship development, called Le Jardin de Fleur, was to be composed of Tourist Apartments and Villas over various plots of land at the Macro Resort “Mediterrania-Saïdia”

Property Logic stopped building some time ago and have ever since been seeking finance to continue the works. The result of this sequence of events has left scores of derelict shells of what were to be luxury apartments and villas full of rats and weeds. It appears to be totally beyond repair at this stage.

To give Property Logic some credit, by comparison to other developers in the region they have been reasonable at keeping up communications with their clients. Unfortunately most of these communications refer to the possibility of raising further funding to complete the project. This funding has always been ‘just around the corner’ but it has never materialised. The willingness to communicate is, however, more than has been shown by other developers in difficulty in coastal Morocco.

From 2004 to 2007, like many other areas, off plan purchases in tourist regions of Morocco experienced a huge boom. Many people came in contact with Property Logic’s high visibility marketing campaigns and it consequently attracted a lot of purchasers. The developer even persuaded some UK based Premier League footballers to invest in the resort. This obviously played very well in UK and Irish media outlets, succeeding in attracting even more buyers. Unfortunately nobody who bought has had deposits refunded, which amount to around 40% of the original property sales price.

Property Logic Payment Structure

Clients reserved their properties with a token deposit which was followed by around 20% of the total cost. Over what was to be the initial construction stage a further 20% was requested at which stage came the signing of a private contract loosely translated from French as “a promise to sell”. Under Moroccan Property Law all these contracts have now expired and, as they were written to favour the developer, they are not robust enough to offer their holders any protection in law. Essentially, the beneficiary names don’t appear officially anywhere in Morocco. There is no legal reference to them so the Moroccan authorities know nothing about them, despite their having parted with significant amounts of money and now having nothing to show for it.

What can clients do?

There are essentially two things you can do. Be passive or be active.

The First Option – Do Nothing and hope Property Logic delivers

The passive route is to wait and hope that Property Logic obtains long promised funding. This is highly unlikely but the building licence has now also expired so the developer would now need to re-apply for a new one. Property Logic also has a good deal of creditors with liens on the company assets who will need to be dealt with before any building is contemplated. To clear the creditor list Property Logic will require the ‘main levé’ from its creditors (literally translated as ‘hands up’ or ‘surrender’ from French. This is a legal document enabling the developer to clear the creditor list. It involves all creditors signing away their legal rights. No strong creditors will do this unless they are happy with the negotiated settlement. Those without rights will be left out in the shuffle, relying totally on Property Logic’s goodwill.

Another matter of concern is that it has been mooted that the company is not held in high esteem by Moroccan Authorities. It is widely considered that the Moroccan government is anxious to see the back of the company and others like them. This makes the possibility of obtaining a new build licence very slim indeed.

Second Option – Become a Creditor of Property Logic

The second and more active option open to clients is that, if they are not already official creditors they should consider very seriously becoming one. Why should a client go to the bother of doing this? As stated previously, contracts with Property Logic are now pretty much worthless. It is almost inevitable that Property Logic will eventually drop out of the equation and whoever takes over will no choice but to deal with the creditor list. Those who are not officially listed as creditors will simply be forgotten about. It’s not an ideal scenario for many clients as it involves reliving the nightmare of the investment and it is obviously going to involve extra expense.

We will deal with the process of becoming a creditor of Property Logic (or any other developer for that matter) in a later article.

Jorge Larios can be contacted at saidia@gmx.es.

Taking Moroccan Developers to Court

I’m back after the summer holidays but, unfortunately, to a tragically familiar story. Buyers of overseas property who have spent their hard earned money and received absolutely nothing in return. The biggest culprit for Irish and UK based investors appears to be, by far, Morocco. Hence the unpleasant vista of taking Moroccan developers to court. Unfortunately, in many cases, there just doesn’t seem to be any other way to get even a portion of your funds back.

This article is based on a piece written by my colleague, Jorge Larios, with whom I’ve been working for some time helping distressed investors in Morocco. I’ve merely edited it somewhat to suit a UK and Irish audience.

Taking Moroccan Developers to Court – By Jorge Larios

Morocco wasn’t really a residential tourist destination until a well known developer from northwest Spain called Fadesa came along. There were always classic Riads within historic cities and some timid efforts at construction along the Atlantic coast but that was about the size of it.

The arrival of Fadesa from Spain in 2005 kicked off with the launch of Mediterrania-Saïdia with much fanfare (the outlay on a launch cruise in the Mediterranean alone was eye-watering). This was part of a number of macro projects along the coastline which were all under the umbrella of the ‘Plan Azur 2010‘, an ambitious government plan to quadruple the number of tourists by that year. This government backing of the project was very important. It was heavily promoted in all developer promotional material and gave foreigners, that might otherwise have eschewed Morocco, a level of confidence to go and invest in the ‘new Spain for property investment’ now that Spain had become too expensive.

So here was Morocco being heavily promoted as an alternative to the Costa del Sol and that message was very successfully delivered. To get an idea of how the story progressed you need only read some owners forums to see how the initial euphoria dissipates and gradually reduces to a cry for help. The scenario swings from trying to get a reservation at all costs in a wildly overheated market to being prepared to accept a loss just to get some of your money back when investment conditions have changed utterly.

The disturbing thing for investors is that the basics of a sound market are there, the delivery from developers along the coastline has, however, been appalling. To be fair, it is not all their fault, the financial landscape for property construction has changed utterly – as it has almost worldwide. It is also important to stress that, much like other countries where property markets have gone wallop, many of the culprits are foreign and were only ever there for the short haul. It is also important to mention that, contrary to popular opinion outside Morocco, the Moroccan authorities are very keen to find solutions to these problems and the legal system works if you use the system properly.

Morocco as a country is growing economically at 4% and has very good relations with the two ex-colonial powers, France and Spain. This extends its reach into the European Union and within the Arab world it is considered one of the most stable countries politically. This allied to its quite moderate religious outlook, made it quite an attractive destination, it was well capable of carrying ‘the story’.

The issue for most of you reading this is not how good ‘the story’ was delivered, it is ‘what are the chances of getting my money back from Morocco?’

Essentially, you want to know is it possible to get your money back if there is a breach of contract on the part of the developer? The answer is a cautious yes, but it very much depends who you are dealing with and how strong your case is. Having reviewed your case and designated it as strong, a refund will only be forthcoming in most cases by taking Moroccan developers to court.

Taking Moroccan Developers to Court – Why is it Necessary?

Moroccan developers can be largely categorised in three groups. The cynics, and there are many at this stage, suggest it should be in line with their ability to ignore you. They all do this unfortunately, it is simply part of the culture. You need to show them you mean business to get noticed. The categories are:

1. Developers with money – in many cases you know the developer has got money but they’re good at hiding it from you.

2. The Developer is insolvent – they will all tell you they’re looking for finance, and some are, but others are insolvent beyond any hope of redemption.

3. The developer has simply disappeared – some were, unfortunately, set up to defraud investors from the off – headquartered in a distant Caribbean Island with well paid lawyers in another civilized and distant region.

A word of warning: Don’t think that appealing to documentary proof or people’s common sense will achieve anything – this is Morocco. You will be very lucky if you get somebody at the end of the line. Some are still complaining because emails aren’t answered. This is, unfortunately, only the start. Communication is not an art form that Moroccan developers have made any great attempt to master.

When you are on the trail of a Moroccan developer you will hear and read many stories about owners getting together to join forces, the Moroccan Embassy, Rabat, the King, God, and pretty much everything else. Unfortunately, none of this works in Morocco. These are western suggestions at solutions to a Moroccan problem.  If you do manage to get hold of somebody they’ll charm the socks off of you and you’ll still leave with nothing. It’s just like that in Morocco.

The unfortunate reality of dealing with this area is that nothing happens unless you take Moroccan developers to court – that’s just how it is. The Moroccan legal system works – investors need to learn how to use it. You need to ascertain firstly that it is worthwhile taking Moroccan developers to court – there’s no point if they’ve got nothing to give you. But eventually, even if they do have money, you’ve got to go the legal route to get it from them.

This article, which is the first in a series, was kindly submitted by Jorge Larios based in Melilla, a Spanish enclave in Morocco. He has considerable experience in dealing with the preparation of clients to take on developers in Morocco, be their Moroccan or foreign. If you wish to find out more drop me a line on: saidia@gmx.es