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Fatawaa


Subject : Ruling on Paying "Security of Good Faith" in Financial Leasing Contract

Fatwa Number : 3637

Date : 25-08-2021

Classified :

Fatwa Type : Search Fatawaa


Question :

What is the ruling of Sharia on the lessor taking "Security of good faith" in financial leasing contract before handing over the leased property? Moreover, what is the ruling in case this "Security of good faith" wasn`t mentioned upon reaching the agreement?



The Answer :

All perfect praise be to Allah the Lord of the Worlds. May His peace and blessings be upon our Prophet Mohammad and upon all his family and companions.

According to the Islamic Accounting Standard No. 8, "Security/Payment of good faith" is defined as "A deposit of money into an account by a client, upon request of institution, to make sure of his financial capacity and that he can make compensation in case he backs out of the deal or doesn`t complete it."

In Ijarah contract, rent is due upon handing over the property to the lessee and in case any amounts are deducted prior to this, they are considered part of the "Security of good faith." These are the amounts deducted before concluding the sale in Murabah upon request of buyer or in closed-end leases.

The Sharia evidence for the "Security of good faith" is that it is collected to make sure of the client`s financial capacity and to compensate the lessor for any future harm. This payment is kept with the institution until the conclusion of the contract; in which case it is considered part of the price or rent. However, in case the contract wasn`t concluded, the institution deducts from this payment an amount equal to the actual harm inflicted upon it due to client`s backing out of the deal.

In conclusion, payments made by the client before signing the financial leasing contract are permissible if kept with the institution as a trust. In principle, both parties should reach an agreement regarding this amount in the first place. If the "Security of good faith" isn`t stipulated in the  promise to purchase  or  the rental document or no oral agreement was reached between the client and the institution to this end, then the client doesn`t have to pay it. However, if he paid it without being required by the lessor to do so then the contract is valid. And Allah the Almighty knows best.




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