Darul Iftaa Mahmudiyyah

Can I charge a penalty for late payments

· 21 Dhuʻl-Qiʻdah 1435 AH1 min readFatwa 30576English

Question

I own a property and I rent or lease it out. Can I charge a penalty for late payments. And can I charge a penalty if it is in the lease agreement?

Answer

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

To charge late fees for a due payment is not permissible as it is tantamount to Riba (interest).[1]

An alternative is to inflate the rent by 10% and if anyone pays timeously, they will be offered a 10% discount.

And Allah Ta’āla Knows Best

Arshad Ali

Student Darul Iftaa
Trinidad

Checked and Approved by,
Mufti Ebrahim Desai.

http://www.daruliftaa.net/

References (Arabic / Urdu sources)

[1] الذين يأكلون الربا لا يقومون إلا كما يقوم الذي يتخبطه الشيطان من المس ذلك بأنهم قالوا إنما البيع مثل الربا وأحل الله البيع وحرم الربا.

Those who take ribā (usury or interest) will not stand but as stands the one whom the demon has driven crazy by his touch. That is because they have said: “Sale is but like ribā”, while Allah has permitted sale, and prohibited ribā. (Verse: 2:275)

يا أيها الذين آمنوا اتقوا الله وذروا ما بقي من الربا إن كنتم مؤمنين. فإن لم تفعلوا فأذنوا بحرب من الله ورسوله وإن تبتم فلكم رءوس أموالكم لا تظلمون ولا تظلمون.

O you who believe, fear Allah and give up what still remains of ribā, if you are believers. But if you do not (give it up), then listen to the declaration of war from Allah and His Messenger. However, If you repent, yours is your principal. Neither wrong, nor be wronged. (Verse: 2:278,279)

Answered by
Arshad Ali
Checked & approved by
Mufti Ebrahim Desai
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Source: Darul Iftaa Mahmudiyyah — https://askimam.org/public/question_detail/30576
Fatawa SA: https://fatawa.co.za/fatwa/askimam-30576

People also ask

Can a business charge a late-payment penalty?

“To charge late fees for a due payment is not permissible as it is tantamount to Riba (interest). An alternative is to inflate the rent by 10% and if anyone pays timeously, they will be offered a 10% discount.”

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