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Leasing (ljara) Rules

[1]

The Judeo-Christian-Islamic Shari'aa law includes rules about renting (short-term) or leasing (long-term) of the right to use an item (usufruct).

The rules that organize the act of leasing are as follows:

■ Renting or leasing is defined by the RF law (Shari'aa) as a contract to take advantage of renting the right to use an item. It is important to stress here that the item to be leased must have a usufruct. For example, one can rent the use of a car or a house while keeping title of ownership to the car or the house with the title owner (because these items are non- fungibles meaning that their nature does not change upon use, and they can be returned mostly in the original shape they were when these were first rented out). However, one cannot rent the use of an apple (fungible, meaning that its nature changes upon using it; eating or consuming it in a food recipe) because once it is eaten, it will not exist and one would have infringed on its ownership.

■ The two categories of the Commodities Indexation Discipline described as reference calibrating materials are (1) Pricing metals like gold and silver and (2) Staple foods like wheat, barley, rice, dates, salt, and corn, for example.

■ These two categories of commodities that are used as calibrating references to establish prices in the market cannot be dealt with in a riba way, which means that when exchanged, substance for substance, there can be no increase over the original value (riba al-fadl). That is, the calibrating reference commodities including gold or silver and food staples, cannot be leased or rented and cannot be speculated with in the market place because they are references for establishing value, just as we reference the measurement of length with what is agreed to be a “one foot” reference metal located in a special safe in London under controlled weather-conditions in order to use as a standard and global reference scale to what we call a foot in length.

■ In addition, one cannot rent something that changes its nature upon using, such as a loaf of bread or an apple. These items are fungibles and cannot be rented. They can only change hands by changing titles of ownership. Another example to demonstrate the ownership versus renting and how it may be confused: one cannot rent a cow in order to collect its milk. That is because when one collects the milk, one acts as if one owns the milk. This is problematic, because the original contract was about leasing the origin (i.e., the cow), not about owning the product (i.e., the milk).

■ The usufruct — or the beneficiary use of the subject — can be the use of:

a. An asset like a home or car.

b. The facility of an asset, such as the use of a car (for driving), a business like a franchise store (a gas station or a fast food business), a medical clinic, or an X-ray machine.

c. The work or productive services of an individual, such as an engineer, builder, worker, or any person who can offer defined valuable work. This concept is being used by some institutions, despite the objection of many RF scholars, as a foundation to offer RF student loans.

  • [1] See note 2.
 
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