The Islamic Ruling on Rent-to-Own Contracts

In the Name of Allaah…

Shaykh Saalih al-Fowzaan mentions that the Council of Senior Scholars has studied the modern “Rent-to-Own” schemes, and they have ruled that they are impermissible transactions, due to the prohibition of two contracts in one.

Audio: http://www.safeshare.tv/w/maZtfNemwq

Video: http://www.safeshare.tv/w/xetfuzAwnZ (different)

Rent-to-own schemes may also include some so-called “installment plans” for automobiles and property, where legal ownership remains with the seller until the payments are complete, which is essentially a rent-to-own contract cleverly disguised as an installment plan.

As an important reminder, we live in times of widespread deception and corruption, so let every Muslim be extremely cautious in how he approaches complex business transactions.

Written by: Moosaa Richardson

6 thoughts on “The Islamic Ruling on Rent-to-Own Contracts

  1. As-Salaamu Alaykum wa Rahmatullahi wa Barakatu,

    Jazakallahu khayran and thank you for posting something on this topic. These kinds of things are becoming more and more widespread, and the commentary above is very beneficial.

    I have been thinking a lot about structuring large purchases between multiple parties (like buying houses in the west) in a way which is compliant with the perfect laws that Allah gave to us by way of Muhammad (may Allah’s peace and blessings be upon him), which would also be a sound financial decision (as much as one could judge such a thing) for all parties involved. To whom should I direct inquiries/ideas on the topic? Sadly, I do not yet speak Arabic, and I do not have access to scholars who could address these inquiries/ideas. I also do not want to share them openly, as someone could cause great harm with them if they are not halal.

    Any advice you could offer in this way would be greatly appreciated.
    Jazakallahu khayran.

  2. What about 401Ks? Is it permissable to have stocks in the stock market? I’m going to school for business and i am afraid that i may be offered stocks in a 401K.

  3. Assalaamu ‘alaykum, I don’t know if I’ve quite understood this.. I want to buy a phone and the only way for me to do so is to sign a contract where I pay an amount of money (depending on my calls and texts) every month and the contract continues this way until 2 years time. Is this a so called “rent-to-own” contract?

  4. As-Salaamu Alaykum wa Rahmatullahi wa Barakatu,

    I would like to buy some furniture, and the furniture store is offering me a 7% discount if I pay cash instead of the Rent-to-Own (most of their customers do the latter). I only intend to pay cash anyway, not to receive the discount, but to avoid the haram. Someone told me that giving discounts to customers paying up front is impermissible. Is this true? If it is true, does it mean that it would be impermissible for me to take the discount?

    Jazakallahu khayran.

    • wa ‘alaykas-salaamu wa rahmatullaahi wa barakaatuh. There is nothing wrong with discounts on cash sales, so long as the price and product are both clear and agreed upon at the time of the sale. Furthermore, there is nothing wrong with paying in installments (not rent-to-own) at a price higher than the cash price offered. You might benefit from the 1428 Fiqh Classes in Toronto (Business Transactions): MP3s.

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