Rulings for mortgage
March 05 2015 11:43 PM


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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