Fatwa: # 44188
Category: Business Matters
Country:
Date: 22nd August 2020

Title

Is Ansar Financing Sharia compliant?

Question

Assalamu alaikum,

Can you please let me knw Ansar Financing if it is sharia compliant to buy home? I saw your detailed responses regarding the queries for Aya Financial & Zero Mortgage. It'll be great if can let us know if Ansar Financing is Sharia compiant.

Here is the link for the site.

http://www.ansarhousing.com/

 

Jazakallahu Khair

Omar

Answer

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

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

The ACHC and ICHC is a house buying scheme offered by Ansar Financial. The Ansar Financial group is located in Toronto, Ontario.

ACHC and ICHC are advertised as a diminishing mushārakah.

ACHC and ICHC obtain their funds through investments from their shareholders.

Framework of ICHC and ACHC Financial

  • A person interested in buying a house must first become a member of the cooperative and invest in a minimum of six shares. To remain a member, he must buy a minimum of six shares yearly. 
  • He will then be put on either list “A” or list “B”. List “A” refers to those clients seeking to buy a home through ICHC and currently do not own a home. List “B” refers to those clients seeking to convert their present mortgage to ACHC’s framework 
  • ACHC will then inform members of list “A” or list “B” when they will be eligible to buy a home through the cooperative. 
  • The interested customers will submit an application of request to ACHC to purchase a home. They will need at least 20% of the first $100,000 cost of the desired house; 25% of the difference between $100,000 and the actual cost of the house up to $200,000; 30% of the difference between $200,000 and the actual cost of the house up to $300,000; and 100% of the difference between $300,000 and the actual cost of the desired house. 
  • The house will be financed through diminishing musharakah. They will buy shares towards the house as they wish, while continuing to pay rent which will determined according to their share in the house. The title of the house will be under ACHC’s name.
  • Once all shares are bought, the title will be transferred onto the client’s name.

Sypnosis

We have analyzed three documents:

  1. Islamic & Ansar Cooperative Housing Corporations Regulations (2019)
  2. Occupancy Agreement
  3. Summary of the scheme from Shariah Standpoint

After Studying the ACHC financing model and analyzing the documents, it is our submission that ACHA does not meet the criteria for complete sharia compliance. It is not fully sharia compliant for the following reasons:

  1. ACHC stipulates a ratio of loss, in the event of sale, that is not permissible.

While ACHC does share in loss, they have stipulated that they will only share 10 percent of the loss, should the customer own more than 50% of the shares, and 20 percent of the loss, should the customer own less than 50% of the shares.

For example, Zaid owns 30% of the house. While selling the house, he incurred a loss of $100,000. As per ACHC regulations, Zaid will have to suffer 80% of the loss and ACHC will only suffer 20%.

In principle, the loss stipulated cannot be more than the ratio of investment. Thus, if a person owns 50% of the house, he cannot be liable for more than 50% of the loss. Thus, Zaid should only be liable for 30% of the loss

  1. ACHC stipulates that a member that sells his house within one year of acquisition will have to pay a penalty of $5000. Charging such a fee is impermissible
  2. ACHC does not share in the expenses of maintaining the property, such as repairs, condominium fees, taxes, etc. ACHC, however, does contribute for major renovations and expansion.
  3. ACHC obliges the occupants to take conventional home insurance. The taking of conventional home insurance is prohibited. Furthermore, home insurance is not a legal requirement in Canada.
  4. ACHC stipulates that the agreement will be binding on the heirs of the members in the case of death. In principle, an agreement of Musharakah will be terminated if any of the parties predeceases the agreement. In such an event, the heirs, at their utmost discretion, can continue the agreement, or sell off the assets and distribute the monies attained according to the ratio of ownership.

 

We have attached a detailed report regarding the documents made available by ACHC. If the Ansar financial group is interested in attaining complete shariah compliancy, they may contact the Darul Iftaa. The Darul Iftaa will assist in overcoming the challenges in making the contract Shariah compliant.

Detailed Report

Document: Islamic & Ansar Cooperative Housing Corporations Regulations (2019)

 

Clause H) (i) As a result of a transfer/sale/completion of a housing unit, any gain or loss realized, after deducting the cost of authorized major improvements and expansions1 , and certain legal expenses, will be divided as follows: 1) 90% to the member and 10% to the “Cooperative”, if at that time, the member had accumulated shares equivalent to more than 50% of the cost of the housing unit; 2) 80% to the member and 20% to the “Cooperative”, if the member had accumulated 50% shares or less of the cost of the house.

Comments:

While ACHC does share in loss, they have stipulated that they will only share 10 percent of the loss, should the customer own more than 50% of the shares, and 20 percent of the loss, should the customer own less than 50% of the shares.

For example, Zaid owns 30% of the house. While selling the house, he incurred a loss of $100,000. As per ACHC regulations, Zaid will have to suffer 80% of the loss and ACHC will only suffer 20%.

In principle, the loss stipulated cannot be more than the ratio of investment. Thus, if a person owns 50% of the house, he cannot be liable for more than 50% of the loss. Thus, Zaid should only be liable for 30% of the loss

Clause I: If a member wants to transfer/sell his/her housing unit within one year from the date of acquisition by the “Cooperative”, he/she will be required to pay a penalty of $5,000.00

Comments:

Charging such a fee is impermissible.

Clause F: All maintenance expenses including Hydro, Heating, Gas, Common area/Condominium Fees, Municipal (Realty) Taxes , Water, Third Party liability Insurance, Legal fee, repairs, material, labour, landscaping, garbage/snow removal, special levies etc. will be the entire responsibility of the member/occupant. However, Third Party Liability insurance premiums paid by the members over the years will be shared by the “Co-operative” by adding the same to the cost of the housing unit.

Comments:

While it makes sense that the occupant is responsible for hydro, heat, gas, water, garbage and snow removal, as these fall under usage of the occupant, both occupant and ACHC should be liable to pay for Condo fees, taxes, etc, as these fall under maintenance of the property. Maintenance of the property is the responsibility of both.

Document: Occupancy Agreement

Clause #6: It is agreed between the parties hereto that all buildings and appurtenances thereto now on, or which may be erected or constructed on, the Land shall form part of the freehold, and shall not be removed or destroyed without the previous permission of Co-operative in writing and the Members/Occupants agree that they will keep and maintain the Land, buildings and any and all appurtenances, and all fixtures and things thereto belonging in good and substantial repair and in a tidy and clean condition, damage by fire, lightning and tempest only excepted, and that they will permit any agent of Co-operative at any time during the currency of this Agreement to enter and view the state of  repair and cleanliness, and further, that they will promptly repair and clean according to notice and fulfil any further requirements  which the Co-operative may deem necessary, and in default of their compliance with any such notice as aforesaid, the Co-operative may enter upon the Land and effect such work as it may deem necessary and all costs so incurred by the Co-operative shall be repaid by the Members/Occupants on demand.

Comments:

Same problem as Clause F. ACHC has put the full responsibility of maintenance on the occupant.

Clause 8(a): The Members/Occupants agree that they will forthwith insure and keep insured the buildings on the Land during the continuance of this Agreement, against any loss or damage to third parties and their properties in an Insurance Company acceptable to the Co-operative and will not do or suffer anything whereby any insurance policy or policies may be vitiated, and will pay all premiums and sum of money necessary for such purposes as the same become due, and will assign to the Co-operative the proceeds of the insurance policy or policies and have attached to the policy or policies the Special Loss Payable clause as rescribed herein. When so required by the Co-operative the Members/Occupants shall provide it with the policy or policies of insurance and renewal receipt or receipts appertaining thereto. If the Members/Occupants neglect to keep insured the said buildings or any of them or to attach the Special Loss Payable clauses as above required, or to pay the premiums, or, when so required by the Co-operative, fail to deliver the policy or policies and renewal receipts to the office of the Co-operative, then the Co-operative may insure the Land and all monies so expended by the Co-operative shall be repaid by the Members/Occupants on demand.  It is acknowledged that the policy of insurance will be maintained with the Special Clause of Loss Payable to the Islamic Co-operative Housing Corporation Ltd.

Comments

ACHC obliges the occupant to take a conventional home insurance. This is not a legal requirement in Canada. This is clearly a clause for their benefit. A Muslim organization of this stature should know the haram nature of insurance.

 

Clause# 10: The parties hereto agree and acknowledge this fact that the occupancy of the aforesaid premises by Members/Occupants does not create any landlord and tenant relationship between them.

Comments

A diminishing musharakah is a shirkah and an ijaarah together. Therefore, in the portion that ACHC owns, they are the musta’jir. Hence. They are the landlord in the portion that they own.

Clause # 12: This Agreement enures to the benefit of and is binding upon the heirs, executors, administrators, successors, and permitted assigns of the parties hereto. This Agreement is not assignable by the Members/Occupants without the written permission by the Co-operative.

Comments:

The agreement should not be binding upon the heirs. If one of the parties dies the agreement should end.

And Allah Ta’āla Knows Best

Mirza-Zain Baig

Student - Darul Iftaa

Montréal, Québec, Canada

Checked and Approved by,

Mufti Ebrahim Desai.

 

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