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Fatwa CenterZakaah on plots whose ownership is not yet transferred
Question
Nowadays, people purchase plots on installments or with full payment, but the possession is given after four or five years. However, they can sell the plot before possession on profit. Now, is the zakah due in this case without possession, and what is the difference of zakah when the purchase of a plot was done with a full payment or in installments?
Answer
All perfect praise be to Allah, the Lord of the worlds. I testify that there is none worthy of worship except Allah and that Muhammad, sallallahu ‘alayhi wa sallam, is His slave and Messenger.
Regarding zakaah and whether it is due on the mentioned plots or not, the religious ruling in this regard is based on knowing the exact nature of the transaction in reference and whether it establishes full ownership or not, given what you mentioned that the ownership is transferred to the buyer after four years or so. Assuming that the ownership is transferred and that what is meant with possession is the purely legal procedures, then the question that must be answered first is: what is the purpose of buying the plot? Is it to trade with it (sell it and make a profit) or only to own it? A property bought without the intention to trade with it is not liable to zakaah. Please, refer to fatwa 344731.
It should be noted, though, that there is no difference between paying the purchase price in cash or in installments as far as the obligation of zakaah is concerned. However, there is a more detailed ruling regarding the person who pays in installments, as the majority of scholars held that the debt cancels the zakaah due on its collateral.
It should be stressed here that a person is not entitled to sell what he does not own, as this was forbidden in the hadeeth narrated by Hakeem ibn Hizaam, may Allah be pleased with him, who said, "I went to the Messenger of Allah, sallallahu ‘alayhi wa sallam, and asked, 'A man may come to me and asked me to sell him something that I do not have. May I buy it from the market and then sell to him?' He, sallallahu ‘alayhi wa sallam, said, 'Do not sell what you do not have.'" [Ahmad, Abu Daawood, An-Nasaa'i, and Ibn Maajah - At-Tirmithi graded it Hasan (good)]
You mentioned that the ownership is not transferred except after four or five years. Accordingly, it is invalid to sell these lands before having full ownership and possession of them regardless of whether the purchase is in cash or on installments. However, if, by possession, you mean the mere legal procedures such as registering it in the buyer's name with the authorities, then this does not negate actual ownership. For more benefit, please refer to fatwa 122183.
The reason for the delay in these legal procedures should be investigated though. If the reason is to mortgage the land for its price when it is sold in installments, for example, then it is invalid to sell it because the (original) seller has a legal right to it, and it cannot be sold except with his permission. If the reason is otherwise, then please clarify it so that we can form our judgment accordingly.
Allah knows best.
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