Renting a shop for profit.
Q. There are two scenarios: 1) I rent out my shop for, say $1000 per month + 1% profit from what the tenant earns. In case he doesn’t make any profit then only rent. 2) I give out my shop to someone on the condition that I will take 50% of the profit earned per month and in case he doesn’t make profit then I get nothing. Are these two forms permissible in the light of Quran and Sunnah?
A. Based on what you have asked, there are two transactions you have indicated to.
The first is that of rental which comes about on account of renting your shop to a person, and the second is seeking profit of either 1% or 50% which in reality comes about on account of an investment into a business. Both of these are different transactions and carry different returns.
If you are renting your shop to someone, then the return / remuneration for this is a ‘rental’ which the person pays you for occupying your premises. In this case, you will not be allowed to ask for a profit seeing that you did not invest in his business. Hence, these two forms you have described are not in accordance to the teachings of Islam. Due to the fact that your part in this transaction is only to the extent that you have ‘rented out’ your shop, then you will be entitled to a monthly rent. You are not allowed to demand a profit from the business of the person seeing that you did not invest in that business.
Also, in the second case, your monthly rent is connected to an event of ‘earning profits’ which may, or may not occur. This means that in the month when the shop brings no profit, then you (the owner of the shop) will not get a rental. This is an uncertainty which will definitely lead to a contention, and hence, not allowed in the shariah.
As the owner of the shop, you need to fix a monthly rental which is known to the lessee. This would be the amount that he must pay, and it is the amount you can demand. If you wish to be lenient to the lessee, (the one who is renting from you), then you can forgive the entire rent or part of it in those months when the shop does not bring a profit.
And Allah knows best.
Mufti Waseem Khan