MOROCCO Law and Practice Contributed by: Loris Marghieri, Dounia El Aissaoui, Julien Nouchi and Mounia Larhrissi, Gide Loyrette Nouel
struction risks (and are freely negotiated by the parties): • Representations and warranties of the con - tractor regarding the feasibility of the project, the contractor’s knowledge of the technical, environmental and legal framework applicable to the project and its ability to carry out the work under the conditions provided for in the contract. • Holdbacks, whereby the owner retains pay - ment of a certain amount (usually up to 10% of the contract price) to guarantee the reme - diation of any defects arising on the date when the work is provisionally accepted. • A performance bond to secure the payment of any penalties that may be imposed on the contractor for a delay or breach of contract, which is normally returned to the contractor or waived following the final acceptance of the work. • A penalty for breach/liquidated damages. • Insurance policies covering professional construction activities and the coverage of certain assets. 7.4 Management of Schedule-Related Risk Delay provisions help mitigate schedule-related risks in construction projects, except in cases of force majeure, unforeseen events or own - er-attributable delays. Penalties are typically capped at a percentage of the contract price. Under Article 264 of the Code of Obligations and Contracts, judges can assess and reduce con - tractual 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 Construction contracts typically outline condi - tions precedent for handover. Upon comple - tion, a provisional handover is conducted, even if minor defects remain, which the contractor must fix during the usual one-year warranty period. After this period, final handover occurs. The owner must then obtain a permit to inhabit for residential buildings or a compliance certifi - cate for non-residential buildings. Using a build - ing without this permit may result in fines and criminal liability.
8. Tax 8.1 VAT and Sales Tax
Real estate sales and purchases generally do not require payment of VAT (ie, when a property is second hand rather than a new building).
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