Rules Concerning Ribā: Ruling on Structured Property Sale to Avoid Ribā and Renting It Back to Seller

Practical Laws of Islam as per the teachings of Imam Khamenei

Rules Concerning Ribā: Ruling on Structured Property Sale to Avoid Ribā and Renting It Back to Seller

English:

Question #1614:

In order to escape the involvement in a transaction that is based on ribā, and get returns for my money, I bought property for a particular price. The real value of the property was much higher. I agreed with the other party that if they changed their mind and wanted to withdraw from the deal within five months of the sale, they may do so provided that they return the money I parted with as a price for the property.
Having concluded the sale, I rented out the same property to the seller for a given rent. Four months later, I came across verdict by the late Imam Khomeini which makes such type of transactions unlawful. What is the ruling in your opinion?

Answer #1614:

If the two parties were not serious in the entire business, in that it was just a formality to allow the seller to get the loan and the buyer the returns on his money, such a transaction, which is to circumvent the issue of a ribā-bearing loan, is both ḥarām and invalid. In such transactions, the buyer has the right to retrieve only the original amount he paid as a price for the property.

-Imam Khamenei, Practical Laws of Islam, Importance and Conditions of Rules Concerning Ribā