Selling property before its completion
Fatwa No: 89527

Question

Please can you explain whether it is permissible or not to sell something that is not in your possession, for example: you want to buy a house which is not yet built, and pay lets say 30% of the agreed value? Before that property is complete and before you pay any more money towards it (you can optionally pay more before completion but must settle the balance upon completion), are you allowed to sell this property for a profit?

Answer

All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad is His slave and Messenger. We ask Allaah to exalt his mention as well as that of his family and all his companions.

 

It is prohibited for a person to sell that which he does not possess. It is confirmed that Hakeem Ibn Hizaam narrated that he asked the Prophet : "O! Prophet of Allaah, a man comes and asks me to sell him something that is not in my possession, shall I conduct the sale and then get it for him from the market? The Prophet replied: "Do not sell that which you do not possess." [Abu Daawood and others]

Therefore, the sale method that is mentioned, which is that the item to be sold is not present at the time of the sale contract, is not acceptable. Probably, the appropriate alternative that is available for the two parties is to agree on the sale of the piece of land without any construction on it. Thereupon, the two parties would create a contract of manufacture. This contract is a subject of a difference of opinion among the jurists. However, the Islaamic Fiqh Committee of the Islaamic congress in its 7th conference permitted it but with the following conditions:

1)     To determine the kind of manufacture, [and here it is building a house], its kind, its price and required features.

2)     The period of time [of its construction] should be determined.

The report of the Committee also stated that it is permissible in the contract of manufacture to delay its payment, or to divide it into known settlements for a definite period of time. Moreover, it is permissible for a contract of manufacture to include a precondition of recompense [if the other party fails to meet the condition] according to the agreement of the two parities as long as there is no sound religious excuse that exempts the party that fails to meet the condition from any responsibility of fulfilling the condition.  

Allaah knows best.

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