MOROCCO Law and Practice Contributed by: Loris Marghieri, Dounia El Aissaoui and Julien Nouchi, Gide Loyrette Nouel
6.6 Determination of New Rent Law No 07-03 provides that a rent increase may only apply every three years following the sign - ing of the lease agreement or the date of the pre - vious judicial or contractual rent review, provided that any such increase is limited as follows: • for residential leases – an 8% increase in the current rent; or • for other leases – a 10% increase in the cur - rent rent. 6.7 Payment of VAT VAT is payable at 20% on rent in the following cases (otherwise it is out of scope of Moroccan VAT). • Taxable rental transactions: (a) rental of furnished premises; (b) rental of equipped premises for business purposes; (c) rental of non-equipped premises for busi - ness purposes when they were acquired within the scope of VAT; (d) rental of non-equipped premises for business purposes in which an intangible asset of the business is included; and (e) rental of premises in commercial com - plexes (“shopping malls”). • Rental transactions not subject to Moroccan VAT: (a) non equipped premises which were pur - chased out of scope of VAT. If the VAT is not applicable, the landlord can opt to pay VAT (at 20%). This option is made by a formal request and can be applied globally or partially to the taxpayer’s activities (ie, the option can be applied to a given real estate project, or to a single building/premises/apartment).
Work and Repairs The parties are free to allocate the various types of work and repairs. However, in general, ordi - nary repairs and maintenance are borne by the tenant, and the landlord bears the cost of structural and major repairs, as well as repairs resulting from wear and tear, force majeure and construction defects. Frequency of Rent Payments The parties are free to negotiate the frequency of rent payments. Rent for commercial premises is usually payable monthly or quarterly in advance. 6.5 Rent Variation Under the applicable regulations, the amount of the rent, the conditions of its revision and the rate of its increase or decrease can be freely determined by the tenant and the owner. However, Law No 07-03 on rent reviews for com - mercial, industrial or craft premises prohibits rent increases during the first three years from the date of conclusion of the lease agreement or the date of the last judicial or contractual review, and/or prohibits the parties from agreeing to an increase greater than the rates set by law (ie, 8% for residential leases and 10% for other leases, including commercial and professional leases). If no agreement has been reached between the tenant and the landlord regarding the rent revision terms and the rate of increase, the par - ties may apply for judicial review based on the above-mentioned rates. In practice, the parties generally agree to a rent review clause that is based on the conditions imposed by Law No 07-03 (ie, a rent increase of 8% or 10% every three years).
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