Criteria for 'lease ending with ownership' transaction
25-11-2014 | IslamWeb
Question:
with reference to question 2513547, i want to elaborate contract for hiring of car from bank. (1) bank purchased a car and registered on the name of bank. tracker was installed by bank and takaful is paid by bank also i.e all asset related expenses are paid by bank as car is property of bank. (b) however freight and federal excise duty were paid by me i.e all operational expenses are met by me as i am using this car. (c) i paid advance rent to bank. some portion of this advance rent is adjusted in monthly rent paid by me. i.e monthly rent=22800+some portion from advance rent. if i terminate the contract now then remaining amount from advance rent will be paid back to me. if complete the contract then at end of contrat i will buy the car on some amount as per contract.if i want to buy car now then my existing contract will be terminated and i will buy car on direct payment to bank. remaining amount fron advance rent will be adjusted in this purchase. (d) no interest is paid to bank for late payment. however in case of long delay in payment of monthly rent bank pays my some amount to charity to remind ne payment within time as per contract. please reply ti this query in light of shariah
Answer:
All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad, sallallaahu ‘alayhi wa sallam, is His slave and Messenger.
There is no problem with the terms of this agreement except for the third and fourth articles. You said, “if I complete the contract then at end of contract, I will buy the car on some amount as per contract;” if you mean that the price of the car stated in the contract is only an approximation and not the exact price agreed upon by the two parties and this is merely a promise to buy the car, then there is no harm in that. However, if you had agreed with your partner on buying the car with a certain amount of money (and included that transaction in the lease contract), then this contravenes the criteria for deeming “lease ending with ownership” lawful, set by the Islamic Fiqh Academy.
The Islamic Fiqh Academy underlined in its resolution those criteria for permissibility (in a lease ending with ownership contract). It reads,
“1. The presence of two contracts that are totally separate and independent with respect to the time of their conclusion and in which the sale contract succeeds the lease contract, or the presence of a promise that would enable the lessee to become the owner at the end of the contract period. In this regard, 'Option and Promise' stand on equal footing with regard to their legal status.
2. There should be a genuine desire from the two parties to conclude the lease contract and not just to use it as a mere veil for the sale contract …”
For further information, please, refer to Fatwa 81863.
As for the fourth article, you said that you would not pay any “interest for late payment” to the bank. This is good; however, you added, “in case of long delay in payment of monthly rent bank pays my some amount to charity to remind me payment within time as per contract.” This is impermissible even if the money will be paid in charity as underlined by many scholars.
Hence, you should revise and amend these two articles before concluding this contract and venturing into this transaction.
Allaah Knows best.