Question:
I live in Canada, and there is a Muslim Housing program that is available to help Muslims purchase homes or businesses. The way this works is based on partnership, where I put 30% of the price of the house I choose, then the corporation puts the remaining 70%. The corporation "rents" its share over a period of time at a yearly rate of 7% of the price of the house. My goal is to buy back their share with monthly or yearly installments (which is set at my convenience at the beginning of the contract). I can do so in any way I want, and while doing so, my rent payments decrease because they are based on the corporation's share. The sooner I buy back their share, the sooner I will own the house, all while paying taxes, insurance, and maintenance. First of all, is this transaction Halaal? Second, shouldn't the corporation share the taxes and other fees involved, they are a partner aren't they? And last, they ask for a profit of 10% on the appreciation value of the house after the ownership is transferred to me, that is if I buy the house for $100,000 and after 15 years it is estimated at $110,000, we are asked to pay 10% of the $10,000 increase. What does Sharee'ah say about this? They say if we want them to share the yearly expenses with them, like taxes and insurance, they want 50% of the appreciation value. I know it seems complicated, but it is not. I just want an idea if this is ok or not, and what should be changed to make this Halaal? May God accept you efforts and reward you according to your intentions.
Fatwa:
All perfect praise be to Allah, The Lord of the Worlds. I testify that there is none worthy of worship except Allah, and that Muhammad is His slave and Messenger.
The way you bought the house is correct [according to what you mentioned in the question], and you and the corporation will be partners in the house. However, renting it with the method that is mentioned in the question, as we understood that this renting will end by owning the house, is not correct, because that is renting and buying in the same contract, at the same time, on the same property. As soon as you pay an amount of the rent, you automatically own a part of the house. Indeed the correct way of purchasing a house is 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 the insurance should be an Islamic cooperative insurance and not a commercial one, and it should be 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.
Allah Knows best.
Fatwa answered by:The Fatwa Center at Islamweb