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[Fatwa-Online | eFatwa] Regarding the HSBC-Amanah/Kuwaiti bank type transaction The Allaamah Shaykh Ahmad An-Najmee (hafidhahullah)  was asked on Monday 2nd Sept '03 in Jeddah, regarding the HSBC-Amanah / Kuwaiti bank type transaction : Question: Shaykh in England the price of land is very expensive and it is not possible for Muslims to purchase property there. Except that previously Muslims were dealing with usury, taking loans from banks. To avoid this some banks now are beginning to offer what they call Islamic mortgages. They have compiled a committee or "shura" of individuals specialising in the field of Islamic banking. They are three individuals (and their names were read to the Shaykh from the HSBC booklet) do you know any of these Shaykh? [Reply: No, I don't know any of them], Ok, shaykh in these contracts the following aspects are involved: 1.      You chose a property and tell the bank about it 2.      The bank agrees to buy the property 3.      You sign a contract saying that you will buy the property from them and rent it off them, such that your monthly repayments consist of: a) rent; b) repayments towards the house price, c) insurance which is mandatory. 4.      The house remains in the name of the bank (the buyer) until such a time as you pay your final payment towards the price of the house. At this stage the house is transferred over to your name. O Shaykh what is the ruling with regard to this transaction? The Shaykh replied by saying that this transaction was not allowed due to the following reasons: 1.      It consists of a contract within a contract, where you are contracting to rent the property as well as buy it from them, and the Prophet (sallallhualyhi wasallam) forbade dealings containing two sale contracts in the same transaction. (Bay'atayn fee bay'ah) 2.      They are forcing you sign a contract upon their terms which may contain truth or falsehood. 3.      It is not permissible to have a transaction with a precondition in it (Bay'un wa shart) [as they lay down the precondition of you buying the house from them, or that you rent the house from them] 4.      The transaction of "a rental agreement concluding with purchase" (Al-eejaar al-muntahee ilat-tamleek) is a transaction that the committee of major scholars have all agreed is an invalid (unislamic, impermissible) transaction. [Note translated version of the fatwa the Shaykh is referring to will follow inshallah.] 5.      The house should be transferred over as soon as the first payment is made, not when the last payment is made. 6.      it is impermissible for them to sell you that which they do not own. 7.      Paying insurance is not allowed and unislamic. The shaykh then continued to say that it is not at all permissible for the shura of this bank to allow this type of transaction. Following this the shaykh mentioned the terms of an alternative and permissible form of this transaction. The Alternative: 1.      you chose a property 2.      tell the bank to buy it and you will buy it from them inshallah, based on negotiations after and only after they have fully purchased the property and a) taken hold of the title deeds and b) the previous owner has relinquished it totally. 3.      At this stage you can start to negotiate with them. You may agree or disagree but you are not bound prior to this to buy the property. 4.      It is permissible however for the bank to use the property as a form of security in case payments are not kept up. 5.      Insurance is not allowed. When  the shaykh was asked : if insurance was mandatory in this transaction and it was the last of the issues to be dealt with before considering this transaction permissible could it be considered as the lesser of two harms? The shaykh replied cautiously: yes. [Note: the reality of this necessity needs to be considered further, and that is the question is it a real necessity to own a property in the UK? Certainly many will answer in the negative because they themselves have lived many years in the country renting property, avoiding interest based unislamic transactions. So to consider that necessity valid, such that a person is left in a life-endangering situation, would be the same justification why many of the Muslims engaged in the usurious transactions of the conventional mortgages. On that basis one should not give up hope feeling a sense of tire and despair, nor should he be affected by the actions of the masses of ignorant Muslims taken in by this latest wave of transactions made to clear the conscious of engaging in usurious dealings, yet not considering the other important pillars of an Islamic business transaction. [Questioner: Abu Ishaaq Nadeem Ahsan-shah]