The Council of Senior Scholars has studied the issue of rent-to-own schemes, and after discussing the matter, the majority of the Council thinks that this kind of transaction is not permissible in sharee’ah for the following reasons:

When something is sold, the item and its benefits or usage must be transferred to the purchaser, so it is not valid for the seller to receive rent for it because it is the property of the purchaser. When something is rented, that means that the usage or benefits of the item (and not the item itself) are transferred to the renter.

Selling something implies that the purchaser both owns the item itself and enjoys usage of it, and if it is worn out or destroyed he bears the cost of that and the loss of both the item and its benefits; none of that falls upon the seller. But if something is rented, the owner who is renting it out bears the cost of any loss or any wear or tear to the item or its benefits, unless the renter has transgressed the limits or shown negligence.

Secondly: The rental fees are calculated on a yearly or monthly basis in such a way that towards the end of the state term, the value of the item is paid off, but the seller calls these payments;rental fees; so that the purchaser cannot not sell the item until he has paid the whole amount.

For example: If the value of the item in question is fifty thousand dollars and the monthly rent is usually one thousand dollars, he makes it two thousand. In fact this is part of the price until, towards the end of the term, the value of the item is paid. But if the purchaser is unable to make the final payment, for example, the item will be taken away from him on the grounds that it is something rented, and he will not be given back the money that he has paid on the grounds that he has made use of it.

It is obvious that this is wrongdoing and forcing people to borrow money to make the last payment.

Thirdly: This kind of contract leads to the poor being careless about debts until many of them end up heavily in debt. It may even lead to bankruptcy for some of the lenders because of losses incurred because of loans to the poor.

The Council thinks that the two parties should look for a sound way, which is to sell the item and put its price in pledge (rahn) and to protect the sellers rights by letting him keep the contract document and ownership papers etc.

And Allaah is the Source of Strength. May Allaah send blessings and peace upon our Prophet Muhammad and his family and companions.

Members of the Council of Senior Scholars who signed this statement include the following:

Shaykh ‘Abd al-‘Azeez ibn Abd-Allaah Aal al-Shaykh, Shaykh Saalih al-Lahaydaan, Dr Saalih al-Fawzaan, Shaykh Muhammad ibn Saalih al-Uthaymeen and Shaykh Bakr ibn Abd-Allaah Abu Zayd.

Another version (narration) mentioned by the Islamic Fiqh Committee in his twelfth conference held in Riyadh from 23 to 28 September 2000 as they stated:

1) There should be two separate contracts, each one with a separate time limit, on the condition that the purchase contract is held after the rent contract, or that there is a promise of owning the property at the end of the rent period.
2) The rent should be real and not for the purpose of buying.
3) The owner of the rented property [landlord] should be the person who is liable for the property. This means that the tenant is responsible for any damage he might have caused to the property, or damage caused by his negligence, and when the tenant is no longer renting the place, he is not responsible for anything.
4) If the contract includes insuring the rented property, then it is the landlord who should be responsible for the insurance and not the tenant.
5) The rules of tenancy should be applied throughout the rent period on the contract that will lead to owning the property, and the rules of sale should be applied when owning the property.
6) Maintenance expenses [other than running expenses] should be on the tenant and not on the landlord throughout the period of tenancy.

Therefore, the above conditions should be observed so that the tenancy agreement that leads to owning the property would be valid.

Allaah Knows best.

Sheikh Ahmad Kutty, a Senior Lecturer and an Islamic Scholar at the Islamic Institute of Toronto, Ontario, Canada, stated in a similar question the following:

If the brother or sister who has asked this question is in dire circumstances and there is no Islamic alternative available to buy a modest house, he or she is allowed to temporarily make use of the fatwa issued by one of the prominent jurists, Sheikh Mustafa Az-Zarqa, may Allah bless his soul, who has offered a ruling based on a valid interpretation of the hanafi school of jurisprudence that Muslims living in non-Muslim countries in dire circumstances are allowed to purchase homes if the rent they are paying over the years are proportionately more than what they would be paying to own the house of mortgage payment, because it is in the Maslaha (interest) of the Shari`ah that Muslims do not end up losing in their financial enterprises because of the strict rules of the Shari`ah. That is because if Muslims consistently lose they will end up at the bottom of the economic ladder for ever.

So, we leave it to your conscience while advising in the following: If you make use of the Fatwa try your best to get rid of mortgage as soon as possible and in the meantime consistently make Istighfar (seeking Allah’s forgiveness).

Allah Almighty knows best.