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Ijarah Lease Agreement

(8) The purpose of the lease remains, throughout the lease period, in the lessor`s risk, in the sense that the damage or losses caused by factors not controlled by the taker are borne by the lessor. 12. The rent must be set at the time of the conclusion of the contract for the duration of the lease. 11. For a valid lease, it is necessary that the assets related to the lease be fully identified by the parties. 6. The purchaser does not use the lease object for purposes other than those mentioned in the lease. If such a goal is not specified in the agreement, the tenant can use it for any use he normally uses. However, if he wishes to use it for unusual purposes, he can only do so if the owner expressly authorizes it. Faleel Jamaldeen lists three characteristics of ijarah that distinguish it from conventional leasing:[3] In contemporary Islamic finance, ijara mawsoofa is the leasing of something (such as a house, office or factory) that has not yet been produced or built.

This means that the contract ijara mawsoofa bi al dhimma is combined with an Istisna contract for the construction of what it is that will provide the service or utility. [18] The financier finances its manufacture, while the party begins to harm the asset after “delivering” it. While futures sales generally do not comply with Sharia law, ijarah is permitted to be used, provided that the rent/lease payment does not begin until the customer receives delivery. Sharia law also requires that the asset be clearly specified and that the rental rate be clearly defined (although the interest rate may vary on the basis of the agreement of both parties). [19] The lessor must own the assets for the entire leasing period. 2. The tenant must have valuable use. Therefore, things that do not have usufruit cannot be rented. In this transaction (lease-sale[7] or lease-lease or lease)[8], the customer rents a good business and agrees to buy it in installments, so that he owns the property freely and clearly until the end of the lease. These are two contracts: Forward Lease (ijara mawsoofa bil thimma): this contract is a combination of construction financing (istisna) and a lease-sale.

Since this lease is executed for a future date, it is called term leasing. The term lease contracts buy the project (usually a construction project) as a whole at the time of completion or in tranches (parts) of the project. The Arabic term ijara means “temporarily offering services and goods for a salary.” The ijara contract includes, as you may assume, the provision of products or services on a rental or rental basis. The ijara Treaty grants a person or party the right to use the object (usufruit) for a specified period of time; the owner retains ownership of the assets. 10. A co-owner of a property can rent his proportionate share only to his co-owner and not to another person.1 The use of the rented object is stipulated in the contract. Other challenges are not non-compliance with Sharia law in practice, but disadvantages in terms of costs or consumer protection compared to conventional financing. Mr. Mahmud el-Gamal notes that the bank/financier must “keep a significant property on the property for the duration of the lease” in relation to the financing leases used by conventional financing. [21] Another problem is that the ijarah client “may be exposed to the risk of losing the property if the financier is sued, loses and declares bankruptcy,” even if the client has paid 90% of the real estate price.

A possible circumvention (with additional costs) is to create “bankrupt” securitization vehicles that retain ownership of the property and “serve as parties to various agreements regarding repair and insurance obligations.” [21] According to M.T. Usmani, “certain requirements of Shari`ah are often overlooked” in ijarah transactions in the real world, such as when an unforeseen circumstance leads to the destruction of the asset, but the tenant is required to continue to pay the rent, in violation of the principle that the lessor assumes the

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