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Fatwa CenterGiving loan to person in return for staying in house he owns
Question
Assalaamu alaykum, My relative leased a house in which my mother is staying. The lease amount is 35,000 Rupees . There is no written contract, only a verbal agreement that once they return the above amount, we will vacate the house or pay rent after that if they agree. (They are not ready to give a written contract now.) Already three years have passed without them returning the amount although they do have money. Is leasing allowed in Islam? And is that for a fixed period or an unlimited time? Please advise.
Answer
All perfect praise be to Allaah, The Lord of the worlds. I testify that there is none worthy of worship except Allaah and that Muhammad, sallallaahu ‘alayhi wa sallam, is His slave and Messenger.
The question is not clear, however, if you mean that you have lent a sum of money to your relative who owns the house in return for staying in it until he returns that amount to you, then this transaction is considered a loan in return for residence. This is a loan that yields benefit, which has unanimously been declared prohibited. The Kuwaiti Encyclopedia of Fiqh reads:
"Every loan in which it is stipulated that something extra is given to the creditor is prohibited, and there is no difference of scholarly opinion in this regard. Ibn Al-Munthir said, 'The scholars unanimously agreed that if the lender (creditor) stipulates that the borrower must pay extra money or offer him a gift or the like beyond the debt, and he lends him money on that basis, then accepting the extra payment is interest.' It was narrated on the authority of Ubayy ibn Ka’b, Ibn ‘Abbaas, and Ibn Mas’ood 
that they forbade every loan that yields benefits, because loans should be given as an act of kindness and an act of worship aimed at bringing one closer to Allaah; if there is a stipulation of extra payment, then this diverts the loan from its purpose and alters its very essence. It has been narrated on the authority of ‘Ali ibn Abi Taalib 
that the Prophet, sallallaahu ‘alayhi wa sallam, said, 'Every loan that yields benefit is usury.' Although the hadeeth's chain of narration is weak, its meaning is valid and true."
Kashshaaf Al-Qinaa‘ reads, "It is impermissible for the creditor to stipulate an extra payment, a gift, or a condition that yields benefit, such as leasing the debtor's house to the creditor for free or for cheap rent or to be repaid with something extra. This is because the loan contract is meant to be an act of kindness to the person who seeks it. It is forbidden to set a condition of extra money to the loan contract because this would alter its very essence." [Briefly excerpted]
Allaah knows best.
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