Resolution No.(1) by the Board of Iftaa`, Research and Islamic Studies:
"Sharia Ruling on Lease Premium"
Question: What is the ruling of Sharia on lease premium and the money paid against that, and is it permissible according to the rulings of Islamic Sharia?
Answer: All perfect praise is due to Allah, The Lord of The Worlds; and may His Blessings and peace be upon our Prophet Mohammad and upon all his Family and Companions.
Ijarah (hiring) is permissible in Islamic Sharia since the Prophet (PBUH) was sent to humanity while people were leasing and taking on lease, so he permitted that. It is well known that Ijarah is a contract whereby two parties agree upon a certain benefit in return for a compensation, that is money.
Ijarah is actually purchasing a benefit, and it is permissible to conclude an Ijarah contract upon lawful benefits, so the benefit of the leased estate is the right of the lessee, and so he enjoys the right of staying in the estate upon which the leasing contract has been concluded. Islamic Sharia has given a lessee the right of staying and residing in the leased estate, so none has the right to drive him/her out of it, and this right has a financial value according to Islamic Sharia as well as custom.
If a lessee was driven out of the estate without being paid the value of that right (lease premium), he/she may not be able to find a similar one without paying substantial amounts of money.
A lease premium is an integral part of the rent that has been agreed upon by both parties (lessor and lessee); therefore, it is permissible that the lessee pays it to the owner as a part of the rent i.e. the value of the benefit. The lessee is also permitted to sell his right in this benefit and take the lease premium from whoever wishes to purchase it for a price higher, or lower than that which he had paid to the owner in the first place.
On the other hand, Muslim jurists permitted employing such a method on the estates pertaining to Islamic Awqaf (endowments) during the tenth, ninth, and eighth centuries (H). They passed a legal ruling which states that the Awqaf administrator has no authority to drive a lessee out of an estate so long as the latter is willing to pay the rent agreed upon in the contract. This way, Muslim jurists have given the lessee of an Awqaf estate the right to remain in it and permitted him to receive a lease premium in case he wished to vacate the estate. By analogy, it is permissible for a lessee, in ordinary types of estates, to demand a lease premium so long as the law grants him the right to stay in the estate even after the expiry of the contact. The law permitted this as a regulative measure meant to prevent injustice, and after consulting people of sound opinion and expertise; it is parallel to putting price tags on commodities to prevent traders from rigging prices.
It is a purely commercial transaction that involves buying and selling beyond suspicions of Riba (usury), or unlawfulness; therefore, contracting parties aren`t considered sinful so long as the contract has been concluded with their mutual consent. It is also impermissible for any party to revoke the contract except with the consent of the other party. And Allah Knows Best.
The Board of Iftaa'
