Rulings for mortgage

Subject: Rulings for mortgage Fri Feb 22, 2008 12:30 am

Rulings for mortgage
Compiled by: ALI-ZIAD N. ALAM SALI
(aznas0429@yahoo.com)

By Dr Saleh al-Fawzan
The linguistic meaning of the Arabic word ‘rahn’ is “settlement”, and
“permanence.” The Islamic legal meaning for rahn is “a security of a debt by
something with which the debt can be fulfilled.” In other words, it means
mortgaging an item with monetary value or collateral as security against a
debt.
Rahn is permissible as indicated in the Book, the Sunnah and by Ijmaa’
(consensus of scholars). Allah says, “And if you are on a journey and cannot
find a scribe, then let there be a rihaan (mortgage) taken.” (2:283)
When the Prophet, sallallaahu ‘alaihi wa sallam, died, his armour was
mortgaged.
Scholars are in agreement that rahn is permissible while travelling. The
majority of scholars have held the opinion that it is also permissible in
residence. The following points outline the rulings of mortgage:
1. The wisdom behind rahn’s validity is to preserve the wealth and protect it
from loss. Allah also commanded us to document debts in writing. He says, “O
you who believe! When you contract a debt for a fixed period, write it down ...
and if you are on a journey and cannot find a scribe, then let there be a
rihaan taken.” (2:282-283)
This is a sign of Mercy from Allah where He guides us to do good for ourselves.
2. For rahn to be valid, its amount and nature should be known. The mortgager
should have the right to dispose of the item, whether he is owner or has
permission to dispose of it.
3. It is permissible to mortgage from your money on behalf of someone else’s
debt.
4. The mortgaged item should be sellable so that the mortgage can be paid off.
5. The rahn can be conditioned in the contract or after the contract. Allah
made the rahn in lieu of writing a debt, as He says, “And if you are on a
journey and cannot find a scribe, then let there be a rihaan taken.” (2:283)
6. Rahn is required from the mortgager only because the right is for someone
else. But it is not required from the mortgagee (the lender) for he can cancel
it at any time, because it is his right alone.
7. It is permissible to mortgage one’s share from a partnership. This is
because the share can be sold at the time the debt is due and then it will be
fulfilled. It is also permissible to mortgage something sold for its value. For
example, if one buys a car or a house for a deferred price, then one can
mortgage it until he pays the price.
8. Neither the mortgager nor the mortgagee can use the mortgaged (collateral)
item without the permission of the other party. This is to protect both
parties’ rights. If the mortgager uses it, then he nullifies the right of the
mortgagee in securing the debt. On the other hand, if the mortgagee uses it,
then he is actually using something owned by others.
9. Benefiting from rahn is permissible, but it should be agreed upon between
both parties.
10. The growth of the rahn and the benefit derived from it becomes a rahn added
to the original rahn that can also be sold to pay off the debt.
11. All expenses incurred from keeping the rahn is the liability of the
mortgager, including storage, guarding the mortgage, etc.
12. If part of the mortage gets destroyed, then the remainder becomes rahn for
the entire debt.
13. If the mortgager pays off some of the debt, the rahn remains as the entire
collateral and none of it can be released until the entire debt is paid.
14. When the payment of the debt is due, the indebted party must repay the
debt, just as one must repay a debt that does not have a rahn attached. Allah
says, “Let then one who is entrusted discharge his trust (faithfully), and let
him have taqwah for Allah, his Lord.” (2:283) and “Let him have taqwah for
Allah, his Lord and diminish not anything of what he owes.” (2:282)
If the debtor refuses to pay, he will be accused of delay and the judge will
then force him to pay. If he continues to refuse, then he should be disciplined
by imprisonment or other means until he repays his debt or the mortgage is sold
to pay off the debt.
The judge can also sell the mortgage in the debtor’s place, if the debtor
refuses to do so. If there is money left after selling the mortgage and
repayment of the debt, then the excess is returned to the debtor. If there is a
portion of the debt that is not covered by the value of the collateral, then it
remains as a liability of the mortgager that must be paid.
15. It is permissible for the lender to use the collateral (mortgaged item) in
some cases, such as riding or milking the animal if it was mortgaged, but the
lender should spend on it and feed it. This is based on the hadith, “The
mortgaged animal can be used for riding, as long as it is fed and the milk of
the animal can be drunk according to what one spends on it. The one who rides
the animal or drinks its milk should provide the expenditures.” (Bukhari)
Imam Ibn al-Qayim said, “This hadith, together with the principles of Shari’ah
indicate that the mortgaged animal should be treated with respect, and this is
Allah’s right. Its owner has the right of ownership. And the animal is in the
possession of the mortgagee, but does not milk it, then the milk is wasted.
Therefore justice, qiyas, and the welfare of the mortgager, mortgagee and the
animal require that the mortgagee benefit from the animal in riding and milking
it. This is compensated for by providing the expenses. By benefiting from the
animal and paying for its expenses, all rights will be fulfilled.”
Some scholars said, “There are two types of mortgage. One requires provision
and the other doesn’t. The first type of mortgage is further divided into two
different types. One is the animal which is ridden and milked, and the second
is the slave. The latter cannot be used for benefit by the mortgagee without
the permission of the owner. The second type of rahn that does not require
provision includes a house, furniture, etc. The mortgagee cannot benefit from
this type without the permission of the mortgager.”

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Subject: Re: Rulings for mortgage Thu Dec 11, 2008 10:13 am

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Reported on the authority of Jabir Ibn.Abdillah, that the Nabi Sallallahi alaihi wassallam said:

“LAA TA’ALLAMUL ‘ILMA LITUB-HUU BIHIL ‘ULAMA’, WA LAA LITUMAARU BIHIS-SUFAHA’ WA LAA THAKAY-YARUU BIHIL MAJAALISA, FAMAN FA’ALA DHALIKA FANNAA RANNAAR...”

WHICH MEANS: “DO NOT ACQUIRE KNOWLEDGE IN ORDER TO SHOW OFF TO THE SCHOLARS, NOR IN ORDER TO DISPUTE WITH THE FOOLISH PEOPLE, NOR CHOOSE SELECTED SEATS IN GATHERINGS, FOR WHOEVER DOES SO, THE FIRE.. THE FIRE…”

Allahu akbar..Allahu akbar..Allahu akbar...

in the service of islam,
ALI-ZIAD N.A. SALI
( aznas0429@yahoo.com )