MOROCCO Law and Practice Contributed by: Loris Marghieri, Dounia El Aissaoui and Julien Nouchi, Gide Loyrette Nouel
coverage of certain assets (such as all-risk insurance for a construction site and a ten- year warranty owed by the contractors). 7.4 Management of Schedule-Related Risk Delay provisions in the event that the agreed- upon milestones or completion dates are not met (unless the delay is due to force majeure or other unforeseen event, or is attributable to the owner) are generally used to avoid any schedule- related risk on construction projects. Delay pen - alties are often capped at a specific percentage of the contractor’s contract price. It is worth noting that Article 264 of the Code of Obligations and Contracts provides that a judge may always assess and then reduce the amount of contractual penalties. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance Owners typically ask contractors for security to ensure timely completion and accurate perfor - mance of the work. A completion guarantee/ performance bond as well as holdbacks (often replaced by a bank guarantee) are frequently provided by the contractor to the client (see 7.3 Management of Construction Risk ). Also, it is standard practice for clients to require an advance payment bond, payable on first demand, to ensure that any advance payments made by the client prior to the commencement of work are repaid. 7.6 Liens or Encumbrances in the Event of Non-payment There are no specific provisions in Moroccan law regarding the ability of contractors and/ or designers to pledge or otherwise encumber property in the event of non-payment by the cli - ent. Only the client is entitled to use the property
as security, as the property is generally owned by the client. 7.7 Requirements Before Use or Inhabitation In most cases, the construction contract speci - fies the conditions precedent that must be sat - isfied before the handover can take place. In practice, upon completion of the work, the par - ties will hold a provisional handover/acceptance ( réception provisoire ), even if there are some slight defects or snags still outstanding, which the contractor undertakes to repair during the warranty period (which is usually one year). Once the warranty period has expired, final handover/ acceptance takes place ( réception definitive ). In any case, upon completion of construction, the owner must obtain an occupancy permit ( permis d’habiter ) or, if the building is not intend - ed for private accommodation, a certificate of conformity ( certificat de conformité ) certifying that the building as erected complies with the provisions of the building permit. This certificate is a prerequisite to the use of the erected build - ing; using a building without such permit may give rise to fines and criminal liability. Real estate sales and purchases generally do not require payment of VAT (ie, when a property is second hand rather than a new building). Pursuant to Article 89-I-4° of the MTC, VAT is payable on real estate work, subdivision/allot - ment operations and real estate development transactions (the sale of plots in a real estate development project is subject to VAT at a rate of 20%). 8. Tax 8.1 VAT and Sales Tax
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