Ijarah and Ijarah Muntahia Bittamleek - Appendix B (The Shariah Basis for the Standard)

Transcription

1. Shari ’ah Standard No. (9): Ijarah and Ijarah Muntahia Bittamleek Appendix (B) The Shari’ah Basis for the Standard Permissibility of Ijarah and Ijarah Muntahia Bittamleek ■ Ijarah derives permissibility from the Qur`an, the Sunnah, consensus of Fuqaha and Ijtihad (reasoning). ■ On the level of the Qur`an, Allah, the Almighty, says: {“said one of them ‘O my father engage him on wages”} wages”},(3) and {“if you had wished, surely you could have exacted some recompense for it”} it”}.(4) ■ The authority for the permissibility of Ijarah in the Sunnah is the saying of the Prophet (peace be upon him): “Whoever hired a worker must inform him of his wages” wages”,(5) and his saying: “Give a worker his wages before his sweat (body odour) is dried”. dried” (6) ■ The permissibility of Ijarah also generated consensus among the legal community. The Ijarah is also acceptable by reasoning because it is a convenient means for people to acquire right to use assets that they do not own since not all people may be able to own tangible assets. ■ The Ijarah Muntahia Bittamleek, on the other hand, is not different in its rules from an ordinary Ijarah, except that it is associated with a promise by the lessor to transfer ownership at the end of the Ijarah term. The permissibility of this form of Ijarah is confirmed by the resolution of International Islamic Fiqh Academy which explained the impermissible and the permissible forms of Ijarah Muntahia Bittamleek.(7) ■ It must be noted that the permissible Ijarah Muntahia Bittamleek is different from hire-purchase as commonly practised by the conventional (3) [Al-Qasas (The Narrative): 26]. (4) [Al-Kahf (The Cave): 77]. (5) This Hadith has been related by Ibn Majah in his “Sunan” [2: 817]; and Al-Haythami in “Majam’ Al-Zawa’id” [4: 98]. (6) This Hadith has been reported by Ibn Majah in his “Sunan” [2: 817]; and Al-Tabrani in “Al-Mu’jam Al-awsat”; Al-awsat”; and Al-Haithami in “Majam’ Al-Zawa’id” [4: 98]. (7) Resolution of the International Islamic Fiqh Academy No. 110 (4/12). 256
2. Shari ’ah Standard No. (9): Ijarah and Ijarah Muntahia Bittamleek banks in the following respects. In hire-purchase, the terms and provisions of sale and leasing are applied to the subject matter at the same time, and subsequently the ownership of the subject matter is transferred to the lessee (buyer), once he pays the last instalment without the need for a separate contract for the transfer of ownership. In the permissible Ijarah Muntahia Bittamleek, on the other hand, the provisions governing Ijarah are applied to the leased asset until the end of the Ijarah term, after which the lessee obtains ownership of the asset in the manner explained in this Standard. ■ It must be noted also that the Ijarah contract intended in this Standard is the lease of tangible assets (chattels or property), which is a contract giving a legal title to legitimate and identified usufruct for a defined period of time in exchange for a legitimate and determined consideration. Promise to Lease an Asset The basis for allowing the Institution to demand payment of money by a party who has promised to take the property as lessee is the need to confirm the commitment of the promissor. This is because a binding promise has financial implications if the promissor retracts the promise. The request for payment of a commitment fee is to cater for financial damage that the Institution may have incurred as a result of the promissor taking back the promise or defaulting in payment. The unified Shari’ah Supervisory Board of Al Baraka issued a Fatwa in respect to Hamish Jiddiyyah (security deposit) in Murabahah.(8) This ruling is also applicable to Ijarah. Acquisition of the Asset to be Leased, or Its Usufruct, by the Institution ■ The basis for not allowing the leasing of an asset that is not owned by the lessor is the Hadith that prohibits one from selling what he does not own,(9) and Ijarah proper is a sale of usufruct. The basis for allowing the leasing back of an asset to the person from whom the asset was acquired is because such a transaction does not involve any ’Inah sale. ■ The basis for not allowing a simultaneous combination of Ijarah and sale is because making purchase contracts contingent upon leasing contracts is impermissible by an explicit text in the view of a number (8) International Islamic Fiqh Academy Resolution No. 110 (4/12). (9) Fatwa of Unified Shari’ah Board of Al Baraka No. (9/10). 257
3. Shari ’ah Standard No. (9): Ijarah and Ijarah Muntahia Bittamleek of jurists. This is prohibited by a well-known Hadith which prohibits two sales in one sale.(10) ■ The basis for the permissibility of sub-leasing when the lessor has allowed it is because the lessee has ownership of the usufruct by virtue of the Ijarah contract, in which case he is entitled to transfer such usufruct for consideration as he deems fit. The basis for impermissibility of subleasing when the lessor has not allowed it is because the ownership of usufruct by the lessee is limited in which case the lessee is obliged to consider any limitations on this ownership. ■ The basis for the permissibility of leasing a property on the basis of specifications even if the lessor does not own it is that this will not lead to dispute, in which case it is similar to a Salam contract. However, in this case the lessor should not request advance payment of the rentals according to one of the views of the Shafi’is and Hanbalis. ■ The basis for preferring that the agent who purchases on behalf of the Institution be someone other than the customer (lessee) is to avoid fictitious transactions and to demonstrate the genuine role of the Institution in making the usufruct of the asset available to the lessee. Contract of Ijarah ■ The basis for the binding nature of an Ijarah contract is because Ijarah is one of the contracts for transferring ownership that depends on an exchange of counter-values. The Shari’ah principle is that these contracts are binding because of the Saying of Allah, the Almighty: {“... Fulfil (your) obligations...”}. } (11) The basis for allowing cancellation of an Ijarah contract due to contingencies is because without the right to cancel the Ijarah contract the lessee would waste money by paying rent for unneeded usufruct due to an event of which he did not contribute to the occurrence. ■ The basis for requiring a designated term for the lease is because without such a designated term there would be an uncertainty that might lead to dispute. The basis for allowing an Ijarah contract take effect based on (10) The Hadith has been related by Abu Dawud in his “Sunan” [3: 283]. (11) The Hadith has been related by Ahmad, Al-Nasa’i and Al-Tirmidhi. Al-Tirmidhi autheticated the Hadith: see, “Nayl Al-Awtar” [5: 248]. 258
4. Shari ’ah Standard No. (9): Ijarah and Ijarah Muntahia Bittamleek future events is because Ijarah is, unlike a sale contract, a contract that involves time and for this it is relevant that it be contingent on future events. ■ The basis for the permissibility of obtaining ’Arboun (Earnest Money) to secure performance is the practice of Umar Ibn Al-Khattab (may Allah be pleased with him) in the presence of some companions of the Prophet (peace be upon him). This practice is also permitted by Imam Ahmad. A resolution has been issued in connection with the permissibility of ’Arboun (Earnest Money) by the International Islamic Fiqh Academy.(12) ■ The basis for the impermissibility of re-leasing after the lease of the asset is that under the first contract, the usufruct of the asset no longer belongs to the owner, and a new contract may not be signed with another lessee before the contract with the first lessee is terminated. Hence, this form of Ijarah is not suitable as an investment instrument, because it constitutes an impermissible sale of the rent receivable pursuant to providing new lessees with an asset already leased out to the existing lessee. The form just described is different from the transfer, by the owner, of the ownership of the leased assets to an investor, so that the latter takes his place, wholly or partially, with regard to the ownership of all or some parts of the assets, as well as in the ownership of the usufruct of, and entitlement to his share of the rent from, those assets. Al Baraka Forum has issued a resolution disallowing multiple leases of the same asset after the first Ijarah contract.(13) ■ The basis for allowing successive leases on the same specified usufruct of a particular asset without specifying a particular period for a particular person is because the usufruct -in line with the term assigned to each party- can accommodate the parties. The justification for not allowing a specific term for each person is that each party will know the term to which he is entitled in his turn and because their applications are considered in order. This rule was supported by a resolution of Al Baraka Forum.(14) (12) [Al-Ma`idah (The Table): 1]. (13) Resolution No. 72 (3/8) in respect of ’Arboun (Earnest Money). (14) Resolution No. (13/4). 259
5. Shari ’ah Standard No. (9): Ijarah and Ijarah Muntahia Bittamleek ■ The basis for the requirement that incorporating co-lessees must take place before any sub-lease contract is signed is because sub-leasing the property means the sub-lessor no longer owns the usufruct, and thus he would be leasing out a benefit of the usufruct that he does not own, which is not permissible in Shari’ah as stated earlier. The jurists have considered a bankrupt lessor -a person who leases things he does not own- among those who must be restricted in using their property. Subject Matter of Ijarah ■ The basis for the requirement that the leased asset must be capable of being used while preserving the asset is that the subject of a lease is usufruct and not the asset, as leasing is not possible for things that perish by use. The basis for the requirement that benefit from Ijarah must be permissible is that leasing an asset that will be used in impermissible way makes the lessor an accomplice in doing evil and this is prohibited as per the saying of Allah, the Almighty: {“Help you one another in Al-Birr and At-Taqwa (virtue, righteousness and piety)”}. piety)”} (15) ■ The basis for the impermissibility of stipulating a defect exclusion clause in respect to the leased asset is that such a condition defeats the purpose of the contract, which is exchange of usufruct for rentals. If the usufruct is partially or wholly impaired, the receipt of the rentals by the lessor becomes a form of unjust enrichment. The resolution of the International Islamic Fiqh Academy has declared that the lessor must accept responsibility for any destruction or impairment of the leased asset insofar as these events are not sustained as a result of misconduct or negligence on the part of the lessee.(16) The Fatwa of the unified Shari’ah Supervisory Board of Al Baraka states that the lessor is not entitled to exclude his liability in respect of defects in the leased asset.(17) ■ The reason why the lessor may not stipulate that the lessee will undertake the major maintenance of the leased asset is that this condition defeats the purpose of an Ijarah contract. Again, it is the duty of the lessor to ensure that the usufruct is intact, and this is not possible unless the asset is maintained and kept safe so that the lessor may be entitled (15) Resolution No. (10/1). (16) [Al-Ma`idah (The Table): 2]. (17) International Islamic Fiqh Academy Resolution No. 13 (1/3). 260
6. Shari ’ah Standard No. (9): Ijarah and Ijarah Muntahia Bittamleek to the rentals in consideration for the usufruct. The unified Shari’ah Supervisory Board of Al Baraka issued a fatwa supporting this.(18) ■ The reason why insurance expenses must be borne by the lessor is that the owner of the asset is responsible for insuring it, and the lessor is the owner. This is supported by the resolution issued by the International Islamic Fiqh Academy.(19) ■ The basis for the permissibility of using a certain benchmark or price index to determine rentals of subsequent periods after the expiration of the first period of an Ijarah contract is that the rentals will subsequently be known. This is similar to the principle of Ujrat alMithl (prevailing market rate of rental) and does not lead to dispute. Again, using a benchmark to determine the rentals is to the benefit of all parties since there is possibility of rental fluctuation that may be in favour of either the lessee or the lessor in view of the fact that the contract remains binding on both parties throughout its term. This rule is supported by a Fatwa issued during Al Baraka’s 11th Forum. ■ The basis for the permissibility of restructuring the rentals for the future periods is that such an act is deemed to create a new contract for a new term for which the rentals are not yet due. Hence, the rentals are not regarded as a debt, in which case the prohibition of rescheduling rentals in return for higher payment is not applicable to this. However, increasing previously agreed rentals in exchange for a deferred period of payment is a form of Riba. Guarantees and Treatment of Ijarah Receivables ■ The basis for the permissibility of obtaining guarantees for payment is that this is not contrary to the purpose of an Ijarah contract. Rather guarantees are relevant to credit transactions because they secure performance. ■ The basis for the permissibility of a payment acceleration clause is the saying of the Prophet (peace be upon him): “Muslims are bound by the conditions they made” made”,, and because payment on a deferred basis is the right of the lessee (the debtor as to rentals), and the lessee may, based (18) Fatwa of the Unified Shari’ah Board of Al Baraka No. (1/97). (19) Fatwa of the Unified Shari’ah Board of Al Baraka No (9/9). 261
7. Shari ’ah Standard No. (9): Ijarah and Ijarah Muntahia Bittamleek on agreement, choose to pay before time and relinquish the deferral of the date of payment entirely. The lessee may also agree to a stipulation that bases acceleration of payment on the event of default in payment. ■ The basis of the prohibition of increasing the amount of lease receivables in exchange for a deferral of payment is because this is a form of Riba. ■ The basis for the permissibility of stipulating that a solvent debtor should undertake to make a payment to charity in case of default is that this is similar to an undertaking to make a donation that is approved by the Maliki scholars, notably Abdullah Ibn Nafi’ and Muhammad Ibn Ibrahim Ibn Dinar.(20) Changes to the Ijarah Contract ■ The basis for allowing the lessor to sell the leased asset to a third party without the consent of the lessee is that the lessor owns the asset and is acting within the limits of his ownership without affecting the right of the lessee that is materialised in the usufruct. If the Ijarah expires, enabling the buyer to take possession of the asset is sufficient to discharge the seller from any responsibility as to delivery in which case the buyer will own the asset excluding the right of the lessee to the usufruct which is attached to the asset even if the ownership is transferred. The Shari’ah Supervisory Board of Al Rajhi Banking and Investment Corp.,(21) and the Shari’ah Supervisory Board of the Jordan Islamic Bank(22) have issued a resolution in support of this ruling. ■ The basis for the termination of the lease contract due to a total destruction of the leased asset is that the rent is in consideration of the benefit of the leased asset and if the latter is destroyed, there is no justification for the payment of the rental. ■ The basis for the entitlement of the lessor to the rentals even though the lessee returns the leased asset to the owner or stops using it is that Ijarah is a binding contract that cannot be terminated unilaterally by the lessee. (20) International Islamic Fiqh Academy Resolution No. 13 (1/3). (21) See: Al-Hattab, “Tahrir Al-Kalam Fi Masa`il Al-Iltizam” (pp. 170). This view appeared in the Fatwas of Kuwait Finance House. (22) Resolution of the Shari’ah Board of Al Rajhi Banking and Investment Corp. No. (11). 262
8. Shari ’ah Standard No. (9): Ijarah and Ijarah Muntahia Bittamleek ■ The basis for the permissibility of terminating the lease contract in case of intervening contingencies or force majeure is that there is a pressing need which calls for this. This is because if the contract were to be binding in spite of such contingencies, then a person with a valid excuse may incur loss that was not a result of a contract. The Shari’ah Supervisory Board of the Kuwait Finance House(23) and the unified Shari’ah Supervisory Board of Al Baraka(24) have issued a supporting Fatwa in this regard. ■ The basis for the permissibility that the lessor may stipulate that an Ijarah contract be terminated due to non-payment of rental by the lessee is that contractual stipulations are primarily valid and enforceable. This stipulation does not legalise impermissible acts or invalidate permissible acts. Therefore, the permissibility of this stipulation comes under the prophetic Hadith stating: “Muslims are bound by the conditions they made except a condition that legalises impermissible act or invalidates permissible act” act”.(25) ■ The basis of the rule that Ijarah does not terminate with the death of either party thereto is that the subject-matter of the contract is the asset and as long as the asset is available the Ijarah contract remains unaffected. The basis for the right of the lessee’s heirs to terminate the Ijarah if they can prove that the contract has become too onerous for their resources is to avoid inflicting damage on the heirs. This exceptional ruling is taken from the Maliki School of law since it serves the interests of the lessee. The heirs of the lessor may not terminate the Ijarah in the event of the death of the lessor because there is no potential damage to them, as they will receive the rentals for the remainder of the term of the contract. Transfer of the Ownership in the Leased Asset in Ijarah Muntahia Bittamleek ■ The basis of the rule that the documents of the lessor’s promise to sell and the methods of transfer of ownership be separated from the Ijarah contract is to ensure that the obligations and liabilities are not (23) Fatwas of the Shari’ah Board of Jordan Islamic Bank No. (18). (24) Fatwa No. (233) and (253). (25) Fatwa No. (9/9) of the Unified Shari’ah Board. 263
9. Shari ’ah Standard No. (9): Ijarah and Ijarah Muntahia Bittamleek linked to each other. The International Islamic Fiqh Academy has issued a resolution in this regard.(26) ■ The basis for the rule that the promise of a client to take an asset acquired by the Institution on lease is binding is that the Institution has acquired the asset in order to lease it to the client due to the promise. Therefore, the rule that the promise to take the asset on lease is binding will protect the promisee. ■ The basis for not allowing bilateral promises is that the resemblance of these promises to a contract, i.e. a contract is effected before taking ownership of the subject matter of the contract. The International Islamic Fiqh Academy has issued a resolution in this regard.(27) ■ The basis for the permissibility of a gift contingent upon the expiry of the Ijarah term is that a conditional gift is valid. The Prophet (peace be upon him) sent a gift to Negus (the former emperor of Ethiopia) on condition that he was alive at the time of the arrival of the messenger.(28) The basis for the permissibility of leasing an asset to the person from whom it is purchased by way of Ijarah Muntahia Bittamleek on condition that the parties observe the lapse of a period of time is that this prevents the contract from becoming a ’Inah transaction. This is because the physical changes to the asset or changes in the value of the asset during this period give it the economic characteristics of a different asset. ■ The basis for the requirement that all the rules prescribed for an ordinary lease are applicable to Ijarah Muntahia Bittamleek is that a mere promise to transfer ownership does exclude the contract from becoming an Ijarah contract or from the applicable rules. This requirement is necessary in order to prevent a linking of contracts (the sale contract and lease (26) This Hadith has been related by a number of companions. It was also related by Ahmad in his “Sunan” [1: 312]; Ibn Majah in his “Sunan” through a good chain of transmission [2: 783], Mustafa Al-Babi Al-Halabi edition, Cairo, 1372 A.H./1952 A.D.; Al-Hakim in “Mustarak” “Mustarak”,, Edition of Hyderabad, India, 1355 A.H.; Al-Bayhaqi in his “Sunan” [6: 70 and 156] and [1: 133], Edition of Hyderabad, India, 1355H; and Al-Daraqutni in his “Sunan” [4: 228] and [3: 77], Dar Al-Mahasin Lil-Tiba’ah edition, Cairo, 1372 A.H./1952 A.D. (27) Intenatioanl Islamic fiqh Academy Resolution No. 13 (1/3). (28) The Hadith has been related by Ibn Hibban: “Sahih Ibn Hibban” [11: 516]; and Ahmad in his “Musnad” [6: 404]. 264
10. Shari ’ah Standard No. (9): Ijarah and Ijarah Muntahia Bittamleek contract). The International Islamic Fiqh Academy has issued a resolution in support of this ruling.(29) ■ The basis for the rule that ownership cannot be made in contingent on a future date is that a sale contract cannot be dependent on a future date, as the term ‘sale’ means that its effect (transfer of ownership) immediately takes place. ■ The basis for allowing recourse to the prevailing market rate of rental when the transfer of ownership becomes impossible without any cause attributable to the lessee is to protect the lessee against any loss as the lessee has paid more than the prevailing rate of rental in order to acquire title to the asset. If this acquisition of title becomes impossible, then the rental must be adjusted retrospectively to the prevailing market rate. This ruling is analogous to the principle that the price must be discounted when a sold crop has suffered damages due natural calamities. (29) See Note (25). 265