Q. My landlord has made an agreement with me that if I delay in paying my rent on the 7th of each Month, he will charge me R350 plus vat as a penalty for the late payment of my rent? Is this allowed in Islam?
A.In principle, the payment of rent from the Lessee (Tenant) to the Lessor (Landlord) is considered a debt in Shariah and as such, the law of debts will apply.
One of the laws of debts is, a person may not ask for more than is due to him as this would constitute Riba (interest). Therefore, a penalty fee for the late payment of rent would not be allowed, as it would be Riba (interest). (Shaami 5/166)
A penalty clause for the late payment of rent is impermissible and cannot be added as a clause in a Shariah-compliant lease agreement.
Allah Ta’ala Knows Best
Mufti Ismaeel Bassa