‫إ جارة‬

Ijarah

Ijarah came from the root word ‫ أجر‬which means compensation or ‫عوض‬. It

also means the sale of usufruct. Legally it is defined as a contract to use the usufruct

of a thing or the services of a person in return for compensation. The subject matter of

the Ijara contract is the usufruct or the service that is rendered by an employee. In rent

the right to use the property is transferred to the tenant and not the ownership of the

property. Although the usufruct or the service is non-existent at the time of the

conclusion of the contract it gradually comes into existence and is accumulated.

Although Ijarah is the sale of the usufruct, it is distinguished from the sale by the fact

that Ijarah, unlike sale, is for a limited time.

Things which if used could be consumed can not be hired. For instance fruit,

food or, money cannot be rented as they are considered perishable properties. Usufruct

is derived from usable properties while service which also comes under the category

of usufruct is rendered by persons who are employed to do a certain well-defined job.

Similarly it is not allowed to rent a cow for its milk or a tree for its fruit because the

milk and fruits could not be classified as usufruct as they are tangible things. Usufruct,

on the other hand, refers to abstract and intangible benefit that is derived from a

certain property such as the shelter from a house or a lift from a horse or car, or

service rendered by an employee or the labour from a cow.

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Legality of Ijara

‫ و رفعنا بعضهم فوق بعض درجات ليتخذ‬,‫ نحن قسمنا بينهم معيشتهم في الحياة الدنيا‬,‫أهم يقسمون رحمت ربك‬

‫ ورحمت ربك خير مما يجمعون‬,‫بعضهم بعضا سخريا‬

“Is it they who would portion out the mercy of thy Lord? It is We Who portion out

between them their livelihood in the life of this world: and We raise some of them

above others in ranks, so that some may command work from others. But the mercy of

thy Lord is better than the (wealth) which they amass.” 43: 32

‫و إن أردتم أن تسترضعوا أولدكم فل جناح عليكم إذا سلمتم ما اتيتم بالمعروف‬

“If you decide on a foster-mother for your off spring there is no blame on you,

provided you pay (the mother) what you offered, on equitable terms.” 2: 233

‫فإن أرضعن لكم فأتوهن أجورهن‬

And if they suckle your (offspring) give them their recompense.” 6 :65 ‫الطلق‬

‫فجاءته إحداهما تمشى على استحياء قالت إن أبي يدعوك ليجزيك أجر ما سقيت لنا‬

“Afterwards one of the (damsels) came (back) to him, walking bashfully. She said:

“My father invites thee that he may reward thee for having watered (our flocks) for

us.” 25 : 28 ‫القصص‬

‫ إن خير من استأجرت القوي المين‬,‫قالت إحداهما يا أبت استأجره‬

“Said one of the (damsels): O, my (dear) father; engage him on wages: truly the best

of men for thee to employ is the (man) who is strong and trusty.”

Hadith:

‫أعطوا الجير أجره قبل أن يجف عرقه‬

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“Give a servant his fee before his sweat dries up.”

‫من استأجر أجيرا فليعلمه أجره‬

“He who hires a person should inform him of his fee.”

Types of Ijarah

Ijarah or lease could generally be divided into two: Lease for the usufruct and

lease for the service. Lease for the usufruct could be both for movable assets such as

car, jewellery, and cloth. It can also be for immovable asset such as house, and

buildings. Lease for the service is also divided into two: Special employee ‫الجير الخاص‬

who works for one employer for a specific wage. He is employed for a known period

and a well-defined service. During the period of the contract he is not allowed to work

for another employer. He is completely subject to the control of his employer as to

what he does and now he does it. ‫ الجير العام‬public or general employee, on the other

hand, is his own master and works for himself. A tailor, a carpenter, a shoe-maker, a

butcher, a physician, a dentist, or a consultancy firm are examples of general

employees. They may work for more than one employer. No one can stop them from

working for others. However, a general employee must provide what he has contacted

to provide in the way of work or services, through he can determine his own method

or performance in so far as the terms of his contract permit. A general employee is

entitled to payment based on his work.

The Pillars of Ijarah

Accrding to the Hanafiis Ijarah has two pillars of offer and acceptance. To the

majority however, Ijarah has four pillars. They are:

1. Expression ‫ صيغة‬which includes both offer and acceptance.

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 2. The parties ‫ العاقدان‬which include both the landlord /Employer ‫جَرا‬
ّ ‫ مَؤ‬and the
tenant/employee ‫مستأجَرا‬.
3. compensation, payment, salary, ‫ أجَرا‬,‫أجرة‬
4. usufruct, service ‫منفعة‬

Conditions for the ‫ منفعة‬Usufruct/Service

1. The manfa’ah should be known. This is possible when the leased asset is seen

and the usufruct or the service is clearly defined and the duration is clearly

mentioned. This is to avoid conflict.

2. Since it is impossible to deliver the manfa’ah, the asset from which the

manfa’ah is derived should be delivered.

3. The usufruct should be attainable. Thus, it is not allowed to rent money or

perishable properties from which usufruct cannot be obtained. Similarly, a house

that is not suitable for stay or a car that cannot be driven cannot be rented as it is

not possible to derive any benefit or usufruct from these properties.

4. The usufruct should be permissible and be used for lawful purposes. For instance

employment in haram industries is not allowed. Similarly, it is also not allowed to

rent a house for gambling.

5. The service should not be obligatory on the person who rendered it. Anyone

who does an action which is obligatory on him is not rewarded for that action or

service. Consequently, Ijarah is not valid when a person is under obligation to

render a certain service. For instance, a wife cannot demand wages for doing

household jobs or for breast-feeding the child. These are jobs which she is legally

bound to do. However, it is permissible to employ a wet-nurse to breast-fed and

provide care to the child, but not her mother if she is not divorced.

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 6. The service rendered should not benefit the employee. ‫أن ل ينتفع الجيلر بعملله‬.

Ijarah is not allowed where an employee has his own interest in the work done.

For instance, a partner may not lawfully be employed by other partners to manage

the partnership. Such a partner-employee becomes an employee for himself as he

is also a partner in the same partnership. He, however, may receive a higher

percentage in the profit compare to other partners who do not contribute to the

management.

7. The usufruct should be used for the same purpose for which the asset is rented.

The usufruct could also be shared among a number of lessees provided the asset is

used for the same purpose.

Conditions for the Wage

1. That the payment (‫ )أجرة‬should be declared to the employee and known clearly

in the contract. The Hadith of the Prophet p.b.u.h. states:

‫من استأجر أجيرا فليعلمه أجره‬

“Anyone who employs an employee should make known to him his salary”.

The payment could be made in advance or postponed to the end of the leasing

period. It is also possible to make partial payment. The Hadith of the prophet

states that Muslims are bound by the lawful conditions.

‫المسلمون عند شروطهم‬

If there are no conditions about payment whether advance or later, if the

Ijarah is for a certain period it is then necessary to pay at the end of that period.

For instance, a house is rented for one month. The payment has to be made at

the end of that month. If the Ijarah is for a certain work the payment has to be

made when the work is done.

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2. ‫ كون الجرة جزء من المعقود عليه‬The majority of the Fiqh Schools are of the opinion that

Ijarah becomes void if a person is employed with the condition that he would be

paid a certain part of the produce in which he is working. For example, if an

employee who is picking up fruit is being paid in fruit. He may not need the fruit

and has to sell it in most probability for a lower price. Similarly, it is not allowed

if the owner of a taxi employs a driver for RM 100 to be paid from his daily

earnings. It is void because there is the possibility that there may not be enough

earning on a particular day as a result of which the driver may be paid less or not

paid at all. These Schools rely on the Hadith of the Prophet p.b.u.h. The Hadith

states:

‫نهى رسول ال صلى ال عليه و سلم عن قفيز الطحا ن‬

The Hanafiis have derived a general principle from this Hadith. The principle

is:

‫ تعين الجر مما يعمل فيه الجير مفسد للعقد‬: ‫القاعدة‬

The Malikis, and Hanbalis, on the other hand, argue for the permissibility of

paying the employee from the proceeds of his work provided the payment is

known. They do not consider this Hadith as Sahih ‫ صحيح‬.

Maintenance of the Leased Asset

The lessor has to bear the risk of loss and un-deliberate destruction of the

asset. He also has to bear all capital expenditure (depreciation) and other

insurance instalments related to that asset while the lessee should bear current

expenditure that may be necessary for utilizing the asset during the leasing

period. If the lease asset is not in good working conditions and has a defect,

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the lessee has the option to cancel the contract or to continue with it. After the

end of the lease period, the lessee is under obligation to return the asset to the

owner.

There is no liability on a lessee, employee or tenant, except when it is

established that he has transgressed or wasted and damaged the property.

In such a case he is liable to replace the property.

Sale of Leased Asset

It is permissible to sell the leased subject provided the purchaser knows and

agrees to the continuity of the lease as the leasing contract is considered

irrevocable. All terms and conditions, rights, and liabilities agreed upon in the

lease contract will be transferred to the new owner. However, if the purchaser

is not aware of the lease, he has the right to rescind the contract. The lease

contract, however, will continue until its stipulated time.

Termination of ijarah

1. If the asset is not capable of giving the usufruct.

2. If the ‫ مستأجر‬tenant fails to pay the rent or adhere to other conditions.

3. If the asset is destroyed.

4. According to the Hanafiis if either of the parties dies. They argue that usufruct

is not property and as such cannot be inherited. The majority of the Schools

consider usufruct a form of property and allow the Ijarah to continue until its

stipulated time.

5. By the mutual agreement of the parties or Iqalah.

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 6. Lapse of the appointed time. For example if the contract is for one year it is

terminated at the end of that period.

Islamic Banks and Lease

Islamic banks use the lease for the usufruct as an instrument of financing. The

bank purchases the asset and rents it out to the customer in return for rental. The bank

uses two models of Ijara: Operational lease and Lease-purchase (hire-purchase).

1. Operational Lease.

The bank purchases and maintains assets which have a high degree of

marketability. The bank rents these assets to other parties on terms and conditions

agreed upon for a specific time. After the termination of the period the asset is

returned to the bank. The bank then leases the same asset to a new lessee. The bank

bears the risk of recession or diminishing demand for these assets. At the end the bank

may choose to scrap or dispose the asset

Operational lease is suitable for assets which are expensive and their purchase

requires a great amount of money such as aeroplanes, ships, industrial equipments and

agricultural machineries. In addition it takes longer time to manufacture these assets.

It is due to these factors that there is increasing demand for leasing these assets. The

bank benefits from the transaction by retaining the ownership of the asset while at the

same time gets a return by leasing it. The lessee also benefits from the transaction as it

meets his immediate need and saves him from buying the asset at a much higher cost.

2. Hire-purchase-Financial Lease

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It refers to a type of ijarah that ends with ownership. Here the bank purchases

the asset based on a promise from a customer. The customer promises to own

the asset through lease. The asset will not be returned to the bank at the end of

the lease period, as is the case in operational lease, but will be bought by the

lessee. The rental is calculated based on the value of the asset which is

financed, amount of rent, and the period of financing.

Operational lease is different from financial lease in a way that the former does

not offer an option to the customer to buy the leased asset at the end of the

lease period while in the latter the option is offered. If a lessee chooses to buy

the asset a new contract will be concluded. All the lease rentals previously paid

will constitute part of the price.

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