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What are the Sharia conditions of the closed-end lease?

Answered according to Shafi'i Fiqh by Darul Iftaa Jordan
What are the Sharia conditions of the closed-end lease?

Answer:

Praise be to Allah the Lord of the Worlds. May His peace and blessings be upon our Prophet Mohammad and upon all his family and companions.

A closed-end lease is made up of two contracts: a lease and a donation  after settlement of payments, whereby the lessee is permitted to own the rented property after the leasing period ends.

During its twelfth meeting, the International Islamic Fiqh Assembly has issued conditions governing the close-end lease. Some of these are: 

First: There are two separate contracts of different timing where the sale contract is concluded after the lease or there is a promise to ownership at the end of the leasing period. This is because it isn`t permissible to conclude a sale contract and a lease of the same property at the same time.

Second: The contract takes the rules of leasing throughout the leasing period and the rules of sale after the property is taken possession of.

Third: The owner of the property shall be liable for repairing any damages unless they resulted from the negligence and misconduct of the lessee. This is because the lessee is trustful and isn`t liable for any damages to the property save in case of negligence and misconduct.

Al-Shirbini (May Allah have mercy on him) stated: "The lessee isn`t liable for any damages to the property save in case of negligence and misconduct." {Al-Eqnaa`, V.2: P.352}.

Fourth: If the close-end lease included insurance, then it should be Islamic cooperative.

Fifth: Costs of non-operational maintenance and insurance of the leased property shall be the responsibility of the lessor because gain entails loss. Just as the lessor collects rent, he is liable for the costs of  maintenance and insurance of the property because it is his.

Al-Mahalli (May Allah be pleased with him) stated: "The lessor is responsible for maintaining the rented property. For example, building bricks, fixing the roof, putting up a door, drainage of water, fixing what is broken, and opening a door that was tightly shut by natural factors. If the lessor took the initiative of fixing all these then the lessee doesn`t have the choice to terminate the contract. But, if the lessor didn`t take this initiative, then the lessee has the choice to terminate the contract because he was harmed by a decrease in the benefit of the property." {Kanz Al-Raghibeen, V.3:P.79}. 

In addition, operational maintenance refers to whatever a machine needs to keep running, such as oil and the like, which is the responsibility of the lessee. Consequently, judging a close-end lease depends on meeting the afore-mentioned conditions.

We (Iftaa` Department) advise whoever intends to enter into a close-end lease to ask a Mufti about its particulars before doing so. And Allah the Almighty knows best.

This answer was collected from the official government Iftaa Department of Jordan.

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