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
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(Note: This is an old article – there have been some new developments on this issue if you were dealing with a Spanish developer and your funds were transferred to Spain. New findings by the Spanish Supreme Court mean that those who signed contracts with Spanish companies like Property Logic and Fadesa, who deposited funds into a Spanish Bank Account and had Spanish Bank Guarantees (or even in some cases without) may be able to reclaim their funds via Ley 57/68 in Spain. Click here to learn more.)
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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 info@diarmaidcondon.com.
