3. THE CONTRACT
Question 206 Leasing to the Seiler
Is it lawful to agree on the purchase of equipment from a Company, or real estate, and then to lease the same to the seller?
Fatwa
In the event that the sale contract is completed first, and is then followed by a contract of lease, there will be no legal impediment to the deal.
Question 207 Leasing to the Seller (2)
Please give us a ruling on whether or not it is lawful to agree to purchase an airplane from a certain party and then to lease it to the same party?
Fatwa
First: The purchase of the airplane from the Company that owns it must be free of any connection to the deal to lease the airplane to the same Company (if that is what is to happen, and there is no reason to prevent it), or to an affiliated Company, or to any other party. This is because if there is a connection, it will lead to the occurrence of a legal prohibition which is a contract that occurs in another contract or what is termed as two sales in one.
Second: There is no legal impediment to arranging for a way to bring about a mutual agreement to lease the airplane when the deal to purchase it has been completed. This is because a mutual agreement (promise) is not a contract, and the only thing to result from it is compensation.
Third: In the event that the Company leases the aircraft, it is essential that all the rules governing the lease contract be followed. (i.e., No attention is to be paid to the proposition that the aircraft will become the property of the lessee in the future.) Accordingly, the owner will bear the responsibility in the event the airplane is destroyed, and if the airplane is to be insured, the owner will pay the premiums. There is no legal impediment to the owner’s making the lessee his/her agent in arranging for such coverage, but these must be at the owner’s expense.
Fourth: The owner will also bear the expenses of basic maintenance of the sort required to ensure the usufruct (i.e., the working order of the aircraft) that was contracted for. It is lawful to make the lessee responsible for maintenance of the sort that equates to operating costs because these may be known and regulated, and may thus be considered like a part of the rent that is paid by the lessee.
Fifth: There is no impediment to a mutual promise, made between the owner and the lessee, to purchase the aircraft after the lease period has been completed. Then, in its own time, a contract of sale may be entered into. A contract will not be valid if it is ascribed to the future because a sale contract does not accept ascription to, or contingency on, the future.
Sixth: It will, however, be possible for the lessee to issue his/her offer to purchase linked to a time removed considerably from the date of issuing (his/her offer), even if this period is the duration of the lease, along with a definite price. The second party will retain the right to issue an acceptance of the offer. Merely by expressing an intention to buy, the sale will take place in its time, i.e., the offer will be effective at a certain time, at the end of the lease contract. Then, if it is met with acceptance during the period the offer is effective, the contract will take place at that time.
To summarize, the steps to be taken for the lawful implementation of this Operation are as follow:
1. The airplane is purchased by means of a normal contract of sale that is free of any stipulations regarding a lease.
2. A lease contract is entered into in accordance with custom, and the lessor and the lessee meet their responsibilities.
3. A mutual promise is made for the transfer of ownership of the airplane at the end of the lease period, or upon receiving an offer effective for a certain period of time.
Question 208 Leasing to the Seiler (3)
Please inform us of the Sharp ah ruling in regard to the bank’s purchasing a certain asset, like an airplane, from a party and then leasing it to the same party, or to another, in such a way that the leasing party (lessee) will take over ownership of the asset upon the completion of the lease period. By way of example, the bank buys an airplane from the Saudi airline for ten million Riyals. Thereafter, the airplane is leased to the Saudi airline, or to any other party, for a sum of two and a half million Riyals annually for five years. When the lease period is over, ownership of the airplane will be transferred to the Saudi airline for a sum of one Riyal.
Fatwa
If the bank is to have füll legal ownership of the item, and then leases it, the Board sees no legal impediment to the deal described in the question. This, however, is on condition that the bank not seil the leased asset to the party from which it bought it, either directly or indirectly, since this might become a covert means to derive benefit from a riba-based loan.
Question 209 Leasing to the Seiler (4)
Please inform us regarding the possibility of the company purchasing certain assets, like aircraft, for a certain fixed price, and then leasing those assets to the same person from whom they were purchased for a certain period of time, even several years. Then, when the period of the lease is completed, will it be lawful for the Company to lease the assets either to a new lessee or to the previous lessee?
By way of example: The aircraft are purchased by the Company for ten million dollars from A. Thereafter, the same aircraft are leased back to A for six million dollars for a period of three years, with the understanding that ownership of the aircraft will revert to the Company after the completion of the lease period.
Fatwa
If the Company is going to have complete legal ownership of the property, there will be no legal impediment to its leasing it back to the party from which it bought it on the terms of ijarah as stipulated in the Shari’ah. The deal, however, must not come about through collusion between the two parties as a stratagem to legalize riba benefits. The Company should provide the Board with a notarized copy of the first instance of such a deal so that it may be thoroughly reviewed.
Question 210 Sub-leasing at a Higher Rate
Is it lawful to lease something for a certain rate and then to sublease the same to another for a higher rate? If this is lawful, is it also lawful to bring a third party into the first lease so as to become a partner and share in the rents collected by means of selling him a share in the usufruct which is guaranteed to the first lessee; and regardless of whether the sale is for as much as the rent paid out, or more, or less?
Fatwa
It is lawful to lease something for a certain amount of rent and then to sub-lease it to another for the same amount as the rent in the original lease, or for more, or for less, as long as the original lessor has no objections and custom allows it.
It is likewise lawful for this partnership to occur at the same amount of rent paid by the first lessee, or at a greater amount, or a lesser one. When the right to the usufruct passes from the first lessee’s disposal by means of a later contract of lease, it is no longer lawful for the first lessee to use what has passed from his/her ownership and become a debt owed to him/her by another.
Question 211 Leasing at a Daily-Increasing Rate
Is it lawful to have a lease contract for a daily rent which increases, such that each day the rent is higher than the day before, if this is agreed to by both the lessor and the lessee?
Fatwa
Such an Ijarah contract is lawful from a Sharfah perspective because the increase here is a part of the original contract and does not arise as a result of delays in payment.
Thus, agreement on paying the creditor more than what s/he is owed, in cases when payment is late, is prohibited in the Sharfah because it amounts to riba whenever excess is gained in return for delay.
Question 212 Leases Ending in Ownership
Is it lawful for an owner and a lessee to enter into a contract under the terms of which the lessee will benefit from the subject of the contract (property, equipment, etc.) for a specified amount of rent to be paid in a definite number of installments over a certain period of time, with the understanding that the subject will become the property of the lessee at the end of the lease?
Fatwa
The contract will be be a sound one if the following is given consideration:
The length of the lease must be rendered precise, and all of its terms must be continued to be met throughout the life of the lease.
The amount of each installment payment must be determined exactly.
The ownership of the subject must be transferred to the lessee by means of its being gifted to her/him. In this manner the promise made earlier between the owner and the lessee may be fulfilled.
Question 213 Reversion of Part Ownership
Is it lawful from a Shari’ah perspective for the Finance House to lease automobiles to a Company for a specified period of time on the condition that one half ownership of the automobiles will revert to the Company after the lease period has been completed?
Fatwa
The first part of the question is lawful, i.e., the leasing of cars to the Company. The second part of the question however, which relates to the reversion of half ownership of the cars to the lessee Company after completion of the lease period, will be subject to the rules (presently followed by the Finance House) concerning a promise to purchase. Accordingly, a new agreement will have to be reached, when the time comes, for the sale of the cars to be sold (however many). Otherwise, the deal entails two sales in one (which is unlawful).
Question 214 Leasing Shares in Projects
Certain of the bank’s clients would like to become partners in its investment projects on the basis that they would share in either the profits or the losses of those projects in accordance with the percentage of their ownership shares. There are significant difficulties, however, in directly managing such musharakah contract projects, and in monitoring their implementation due in the main to circumstances dictated either by distances or by the lack of experience on the part of the bank’s staff. Therefore, the bank decided to resort to the principle of leasing its share in these projects to these same investors in return for a variable monthly or yearly lease. What is the opinion of the Board in regard to this matter?
Fatwa
The Board sees the possibility of the bank undertaking the Operation to lease its shares to partners in the manner suggested by the bank’s management. It will be necessary, however, to ensure that the lease will be for the assets, like real estate and equipment, that are included in the projects. Likewise, the bank will have to study the laws related to leasing, and to what extent the bank will be able, in the light of these laws, to realize what it seeks by making the monthly or yearly rent variable.
Question 215 Dated Options
Please explain the Shari’ah position in regard to the Jordan Islamic Bank’s purchasing equipment, registering it in its name, and then leasing it to another party for a certain period of time (four years, for example). During this period the equipment will be used in return for a yearly lease fee which is fixed for an amount agreed to by both the bank and the lessee.
In further explaining the question, it may be helpful to divide the question into two parts.
Part One: The Bank purchases equipment/supplies for a sum of one million Dinars and leases these for a period of four years for rent payments totalling 1.2 million Dinars, or for three hundred thousand Dinars per year. This will be done on the understanding that ownership of the equipment will revert to the lessee at the end of the lease period (four years) for the simple reason that to disassemble, ship, and then resell the equipment will cost more than the equipment will be worth (by that time).
Part Two: Is it lawful to agree from the beginning that the lessee will purchase supplies and equipment from the bank at the end of any year from among the years of a lease contract, in the manner explained in the following example?
The price of the equipment is one million Jordanian Dinars.
The amount of the yearly lease payment(s) is 300 thousand Jordanian Dinars.
A. If the lessee wants to buy the equipment at the end of the first year (of the lease contract), s/he will pay the following: 300 thousand Dinars, the amount of the yearly lease payment; plus 750 thousand Dinars, the net total value of the equipment (one million and fifty thousand Dinars).
B. If the lessee wants to buy the equipment at the end of the second year, s/he will pay the following: 600 thousand Dinars, or lease payments for two years, plus 500 thousand Dinars, the total net value of the equipment (One million and one hundred thousand Dinars).
C. If the lessee wants to purchase the equipment at the end of the third year, s/he will pay the following: 900 hundred thousand Dinars, or lease payments for three years, plus 250 thousand Dinars, the total net value of the equipment (One million, one hundred and fifty thousand Dinars).
Is it lawful for the bank to seil these leases (i.e., the ones it enters into with the lessee of the equipment), considering that the lease contracts represent financial rights held by the bank? Or is it lawful to sell the leased equipment to a new buyer who will agree to continue to honor the contract of lease between the bank and the lessee?
Fatwa
Before giving a definitive answer, it may be helpful to consider certain texts and legal principles that may guide us to a clear explanation of the answers to the above questions.
1. Ijarah is a contract necessitating the transfer of an object’s usufruct, without transferring ownership of the object itself This is obvious from the nature of the contract itself, and is attested to by all the classical works of fiqh.
2. The ijarah contract is a contract of mutual remuneration and will for that reason accept everything that a sales contract accepts, like an option to choose (khiyar al shart) and an option to view (khiyar al ru’yah). Moreover, it is lawful for either of the two parties to the contract, either individually or together, to set conditions for the continuation of the contract or for its termination. The purpose of an option is to allow for contemplation before commitment to a binding contract. If the option period passes by without the one with the right to it actually exercising the option, either to terminate or continue, the contract will become binding. Therefore, during the option period, nothing other than its non-binding nature will result from the contract. That is in relation to one who stipulates the option for him/herself. If s/he goes through with the contract, the rent for the entire period will be due. But if s/he terminates the contract, the rent will be due only for as long as s/he had possession of the usufruct, if at all.
3. Certain jurists, like Abu Hanifah, held it unlawful for the option period to last longer than three days. Other jurists held it to be lawful for a month. Imams Ahmad ibn Hanbai, Abu Yusuf, Muhammad ibn al Hasan, Ibn Mundhir, Ibn Abu Layla, Ishaq, and Abu Thawr held it lawful for the period to last for as long as the two parties agree upon, whether long or short, on condition that the period be fixed and known to both parties.
4. If an object is leased and then sold, the sale is lawful; even if it is to the lessee him/herself because the object is in his/her possession. Will the ijarah be terminated? There are two viewpoints on the matter. One is that it will not (be terminated) because the usufruct is owned by means of a contract, and then the object itself is owned by means of another contract, and there is no mutual contradiction between the two.
5. The Hanbali jurists however held that ownership may be transferred to the buyer, from the seller, during the period of the option.
6. In the most widely held of the two opinions held by jurists on the matter, it is lawful to combine a lease with a sale.
7. There is nothing wrong with a Single option in a sale; rather the prohibition is against two or more conditions in a single sale contract. The most obvious opinion put forward by Imam Ahmad ibn Hanbai is that the two conditions prohibited are conditions that are invalid. If, however, an option is mentioned, or more than one option, which is in keeping with what is called for by the contract, or in its interest, like a sale with an option to choose and a delay, or with collateral and a guarantor, then that will not affect the contract, however many (such options) there may be.
8. Rights are divided into personal rights, real rights, and theoretical rights. Real rights include ownership, disposal, usufruct, and residence; while theoretical rights pertain to all non-material things.
9. Wealth is every object or right that has a material value in transaction, and everything that can be possessed either materially or theoretically and from which benefit may be derived lawfully, such that by its nature it may be transacted in, or which, by law, may become an object of financial rights.
10. Sale is the transfer of ownership of wealth or financial rights in return for recompense.
11. Consumables are those items from which no benefit may be derived save through their consumption. Usable items are those that may be benefitted from over and over again, for the life of the object.
12. There is a difference between things and wealth. Some things are wealth and some are not. Further, some things are material and some are theoretical. There are many theoretical things nowadays and people often finance them. This has become a matter of common practice among people, and there is no scope for its denial. In the Civil Code of Jordan many theoretical things, like songs, trademarks, and logos, are considered to be wealth.
13. Possession may be physical or abstract. According to the Civil Code, possession may occur by means of physical possession of the thing itself, or by possession of its essence. Thus, whoever possesses a house, possesses its usufruct in following. This is the opinion of the Maliki, Shaff i, and Hanbali schools of jurisprudence. Even though the Hanafi school did not consider usufruct to be wealth, they made exceptions of wealth donated to trusts, the estates of orphans, and certain others.
14. The Civil Code of Jordan, in the best interests of people, has adopted the opinion of the three schools of jurisprudence that usufruct is to be considered wealth. Furthermore, there is nothing in the Qur’an or in the Sunnah of the Prophet, upon him be peace, to suggest that usufruct is not wealth. For this reason, the scope of the definition has increased to include rights if they are connected to wealth, like the rights of a lessee to the object of the lease, rights of passage, or water rights. If the right is connected to something other than wealth, like the right to custody, then this will not be considered wealth.
Having reviewed all of the points above, we may now consider the questions.
The first instance, in the way it was depicted, is clearly not lawful because the lease contract gives ownership of the usufruct, and it is not lawful for it to give ownership of the lease object itself owing to differences in the nature of the two contracts and their results.
This, however, will not prevent the bank from agreeing with another party to seil the object at the end of the lease period for a fixed price agreed to by both parties. Nor will it prevent the bank from promising the other party to seil it the object at the end of the agreed lease period (which is also fixed) for a certain amount agreed to by both parties. This will be a legally binding promise in the Jordanian Civil Code.
The second instance, as depicted in the question, is not lawful from a Shari’ah perspective. This is because the contract includes an element of gharar (ambiguity) which prevents knowledge of the exact duration of the lease period, and when it is to begin.
Even so, this will not prevent the two parties from agreeing that the second party will have an option to choose at the end of the first year (of the lease), for example, or at the end of the second year (the option period, too, must be specified). The party must agree however to make the installment payments (rent) for the entire period s/he enjoyed the usufruct of the object. If s/he exercises her/his right to the option, then the contract will be terminated there and then.
Question 216 Leases as Financial Rights
Is it lawful for the bank to seil leases it has contracted with lessees for equipment and supplies, considering that these contracts represent financial rights? And is it lawful for the bank to seil the equipment and supplies to a new buyer who will continue to honor the leases concluded between the bank and the lessee(s)?
Fatwa
The question depicts two circumstances:
The First:
The bank sells the lease contracts on the basis that these contracts represent financial rights owned by the bank. It is well known that the Shari’ah defines a contract as a joining of an offer and its acceptance, and this has actually occurred here. The bank, here, owns the leased equipment and has the right to collect whatever profits and installments it stipulated in the agreement (lease contract). It does not, however, own the right to the usufruct of the equipment for the duration of the lease period. Rather, the one who owns the right to the usufruct, which is what is supposed (in the question) to represent a financial right (for the bank) is the lessee. Therefore, it is the lessee who is entitled to seil that right. It is for this reason that the Board wonders what rights the bank proposes to seil? Unless it proposes to seil the remaining rent payments and its profits therefrom; but that is not lawful under any circumstances, even with a delay, because it brings about riba which is clearly prohibited.
The Second:
This scenario has the bank selling the equipment to another buyer, someone new, who agrees to continue to implement the lease contract already in place between the bank and the lessee. This case is one that is mentioned in al Mughni and several other of the classical legal handbooks where it is recorded that if an object is leased and then sold, the sale will be lawful, even if the buyer is the lessee. This is because the object is in the possession of the lessee. So the ijarah will not be terminated because ownership of the usufruct is transferred by the lease contract, and ownership of the object is transferred by the sale contract; so there is no contradiction. It must be made known, however, that the sale will not affect the rights of the lessee from the (original) lease in any way.
Question 217 The Purchase of Leased Equipment
Please inform us regarding the Sharfah position on the purchase by our bank of passenger airplane that carries a lease already signed by an airline? The bank asks the Board for its opinion about the lawfulness of such a transaction.
Fatwa
The matter is lawful from a SharFah perspective, if the bank considers the following:
First: The contract of sale and purchase must be intended in actuality, not merely in appearance. The way to accomplish this is for the bank to take complete legal possession of the aircraft.
Second: Neither the taking or giving of riba must be allowed to enter into the contracts of sale, purchase, lease, or management, either directly or indirectly.
Third: The bank must assume the responsibilities of an owner/lessor as specified in the SharFah, including its guaranteeing the aircraft and its engines for the duration of the lease, regardless of whether the bank insures the plane itself or makes the airline its agent for that purpose. (In either case,) the bank will bear the expense of insurance.
Fourth: The bank will bear the expense of the owner’s share of maintenance (this includes everything essential to the running condition of the leased item, such that the usufruct that was contracted for remains available to the lessee; like the replacement of damaged parts
that will not break under normal circumstances). There is no legal impediment to the bank’s contracting with the airline to provide maintenance of the sort mentioned, if this is done in a separate contract, or in one that follows the lease, and for a specified amount.
Fifth: All contracts dealing with the airplane’s sale, lease, maintenance, and management must be altered in such a way that they are in complete compliance with the Sharp ah, whether by passing the responsibilities of the lessor to the lessee, or vice versa, or anything else that should be altered to bring these into compliance.
Sixth: There is no legal impediment to the bank’s managing the lease and sale of the aircraft whenever the bank decides to do so, as long as this is done in accordance with the regulations listed above. When the bank has complied with all of the regulations, it may then enter into the operation it proposes. It must be sure, however, to report its actions in all of these contracts to the Sharp ah Supervisory Board, in both Arabic and English, so as to ensure that all of its dealings comply with the Shari’ ah.
Question 218 When to Begin Payments in a Lease
The bank leases land for the purpose of building a branch office. The improvements on the land and the construction of the branch office require nearly two years before the branch can actually be opened for business. When is the bank required to begin lease payments on the land? Will it be from the time possession is taken of the land? Or from the time the branch is opened for business?
Fatwa
Payments are required of a lessee from the time of taking possession of the item leased from the lessor. In this case, the payments will be due as soon as possession is taken of the land.
Question 219 Payment before Receipt
Please inform us if it is lawful to seek payment before delivery of the leased object?
Fatwa
First: It is essential to consider the contract for the purchase of items separate from the lease contract owing to differences in the requirements and rules particular to each contract.
The initiation of a contract to import items that stems from an understanding of the presence of a lessee for those items and his/her determination to lease them must be limited to the motivation or the reason (for the same) which happens to be that mutual promise. This, however, should not lead to confusion with regard to the duties of each party or to ambiguity with regard to their responsibilities.
The contract to purchase items is between the bank and the importer. Everything connected to the contract, like responsibilities, payments, and results becomes the responsibility of these two parties. The contract to lease is between the client and the bank. Likewise, the responsibility of the lessee to make payments stems from his taking possession of the item(s) leased to him, which constitutes the subject of the lease contract. The responsibility does not stem from payment of the amount financed either in advance or later on. Rather, that is a matter that concerns the bank, and the bank is to bear it on its own. So, before delivery of the items (in part or entirely) there is nothing to justify the right to receive payments. This is because the lease contract is a contract that is subject to time, and no rent will be due merely because of the contract, but rather as a result of the subject of the lease being made available. Even so, rent payment may be made in advance when availability is ensured for the entire period of the lease, even before the lease usufruct is exhausted. Still, the important thing is that the rent be countered by the usufruct, and this is not possible before delivery of the leased item.
At the same time, it is not lawful from a Sharp ah perspective to take any amount from the lessee for the period preceding delivery of the leased item(s). Nor will the lessee be held liable for any amount until after delivery of the item(s).
Second: the rent payment must be known exactly, with regard to the amount and the due date. An indication of the same, by saying that it should represent so much profit, is not acceptable. This may be no more than an indication of how the rent is to be calculated, and there is nothing wrong with that. Even so, it is essential that the rent be specified in the contract itself, far removed from any mention of profit.
Question 220 Helping a Client with a Legal Loophole
At times we find that a client will want to lease something in particular, but that s/he insists that ownership of the item should be transferred to his/her name, but while s/he has the bank hold the item as security for tax purposes. Will it be lawful, after we purchase the equipment and then lease it, to transfer ownership to the lessee while holding it as security for the client?
Fatwa
If the method mentioned by the bank is not considered fraudulent by the laws of the country in which this is to take place, but is rather a legal loophole in the law, then the Board sees no reason to prevent the bank from doing this kind of business.
Question 221 Leasing a Nonexistent
Is it lawful to lease a building for which detailed architectural drawings exist before it is built, on the understanding that it will be handed over as soon as it is completed in exact conformance to the specifications in the architectural plans approved by the appropriate authority?
Fatwa
It is not lawful to lease a building for which detailed architectural plans have been drawn, but which has not yet been constructed, on the condition that it be handed over after the construction has been completed. This is because such a lease would be a lease of a nonexistent for which a description cannot be determined precisely. Such ambiguity about the description and the time (the building would be ready for occupancy) may lead to disputes.
Question 222 Property in Leasing Funds
Will it be lawful to offer previously leased properties in an investment fund?
Fatwa
Leased properties are not a suitable subject for offering in an investment fund consisting exclusively of such properties (and offered, i.e., the investment fund) for the right to rental income for the shareholder (if the investors in the fund are shareholders) or the partner (if the investors in the fund are partners) who enters into the partnership after the (signing of the) lease contract(s). The reason for this is that usufruct of the real estate becomes the possession of the lessee with the signing of the lease contract. There is no way, thereafter, for the owner of the property to seil his/her share in the usufruct, or for a partner (coming after the lease) to have a right to the earnings on his/her share of it. This is because what the owner retains after the lease is the countervalue of the usufruct, or the debt that has become the liability of the lessee, and it is not lawful to sell debt to those who are liable for it.
The most that can be done is that the owner (lessor) can dispose of the property itself by selling it outright, or a share of the property by way of partnership. That sale, if it takes place with the buyer’s knowledge of the lease, will be akin to a sale in which the usufruct is deferred for a specified period. If the sale takes place without the buyer’s knowledge of the lease, the buyer will have the right to cancel the sale. In that case, the lease will continue and the lease payments will belong exclusively to the owner who leased out the usufruct.
In the legal opinions issued at the Second Albaraka Seminar, a question was posed concerning a Situation in which the partnership of a third party (an investor) to a lease contract previously concluded was proposed, such that the third party might receive a share of the lease payments through his/her share in the usufruct. The answer to this question went as follows:
If the right to (have use of) the usufruct passes on by means of a following lease contract, i.e., a contract that follows possession of the usufruct by the first lessor who either owned the property itself or who owned only the usufruct by means of a lease with the original owner for the purpose of leasing it to a third party, it will no longer be lawful for that lessor to have use of the property that left his/her possession and became a debt that is owed to him/her by another (the lessee or the sub-lessee).
The explanation of the above is that before the public offering, the usufruct of already leased real estate has left the possession of the group (of original investors), thus rendering it impossible (for the group) to include anyone else in that usufruct. Thus, the partnership of an investor in ownership of this real estate will be limited to possession of the land itself. (i.e., Returns on the investment would be limited to capital gains.)
If the partnership comes about before the lease contract is signed, and the real estate is leased later on, the partner will be entitled to share in the produce (returns, rents, etc.) in proportion to her/his share, because s/he owns a part of both the land itself and the usufruct.
The only way out of this Situation is to limit partnership offerings to deals in which the lease contract has not actually been concluded. In order for this to come about, it may be possible to contract a series of leases at regulär intervals, and to offer for subscription a number of unleased properties. Thereafter (i.e., following subscription), lease contracts may be concluded. Nor will such an arrangement be prevented by the presence of general agreements promising such leases without actually concluding them, regardless of how long a period the agreements cover. It will be necessary, however, that the agreement include mutual notification regarding the contract’s closing, conditions, and descriptions.
In this manner a partnership may be brought about with the clients (subscribers to the fund) in the ownership of the property and, therefore, in the ownership of its usufruct before possession of the usufruct passes to another, and the subject of the partnership becomes debt owed by the lessee.
Question 223 Leasing and Managing Leases
Certain European companies lease equipment like airplanes and heavy machinery to companies and institutions in Europe for a period of time, ten years for example, benefitting all the while from tax breaks. After the passage of two or three years, when the tax breaks are no longer applicable, the companies will seil the equipment along with the leases. The selling companies will then continue to manage the equipment for the life of the leases, collecting the lease payments and delivering them to the new owners. Moreover, the first lessor (the selling companies) will guarantee to the new owners all the responsibilities of the lessee. Will it be lawful for our (Islamic) Company to engage in this business?
Fatwa
This is actually a sale of equipment. It is lawful for the (Islamic) Company to purchase equipment that carries already-concluded lease contracts for it. The leases will continue as long as the one to whom the equipment will return agrees to the continuation and completion of the lease period. This is because ijarah is a binding contract. There is nothing wrong with the first lessor managing the equipment by collecting the payments from the lessee and guaranteeing that the lessee will honor all of his/her responsibilities. The Board sees nothing wrong in any of this from a Sharfah perspective. The Islamic Company should, however, invest its money in Muslim countries, if these can put up the necessary guarantees. This is because several of the wealthier airlines in Muslim countries lease their aircraft and equipment on terms similar to those described in this question.
Question 224 Brokerage Fees
Parties interested in leasing unoccupied properties will sometimes be brought to the bank by people who ask for the equivalent of a month’s lease payment in return if a lease is signed (by the clients they brought to the bank). Is this lawful?
Fatwa
Yes, this is lawful from a Shari’ah perspective because such a payment may be considered a broker’s fee which is a payment to one who brings a client or a customer to another.
Question 225 Seeking Return of a Brokerage Fee
Is it lawful to seek the return of a brokerage fee paid to a broker if the deal is dissolved after the contract is signed?
Fatwa
The amount paid as a brokerage fee is the right of the broker and may not be taken back (after the contract is signed) regardless of whether or not the contract is subsequently dissolved.
By Yusuf Talal DeLorenzo.
Comments
John Doe
23/3/2019Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.
John Doe
23/3/2019Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.
John Doe
23/3/2019Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.