Zakat on house purchased for resale then leased
Question
Further to your answer entitled Zakat on investment properties (https://islamicportal.co.uk/zakat-on-investment-properties/), I have a specific question. A person purchases a house with the intention to re-sell the house. Thereafter, he enters into a two-year lease with another person and intends to sell the house thereafter. Is Zakat necessary on the value of the house? I am getting mixed views on this.
بسم الله الرحمن الرحیم
Answer
If a person purchases a property with the intention to re-sell it and thereafter enters into a lease on the house and abandons his intention to sell it during the lease, Zakat will not be necessary on the value of the house. This is because he has abandoned his intention to sell. An intention to sell in the future is not the same as the intention to sell in the present.
However, if he enters into a lease whilst retaining his intention to sell the property in the present, irrespective of the lease, then Zakat will be necessary on the value of the property. This is because the intention to sell has not ceased, as evident from the fact that if a suitable price was offered during the lease period, he would sell the property. Sometimes properties are leased for income as the sale can take time, and sometimes properties that already have tenants are more attractive to investors. Therefore, if the intention to sell in the present has not ceased, Zakat will be necessary on the value of the property.
Allah knows best
Yusuf Shabbir
8 Ramaḍān 1445 / 18 March 2024
Approved by: Mufti Shabbir Ahmed and Mufti Muhammad Tahir
