Payment for extending the term of a pledge

Question

Question: Zayd pledged (rahn) one of his houses to Bakr, with possession handed over, for the sum of three hundred rupees for two years; he fixed a date for the dissolution of the pledge and drew up a document: if he could not pay at the appointed time, this pledge deed would be deemed a deed of sale. When the term of the pledge was nearing its end, Zayd took a further three hundred rupees from Bakr and extended the date for the dissolution of the debt.

Answer

The stipulation in the pledge document that, once the fixed date has passed, it is to be deemed a deed of sale is not valid in the Shari‘a: in the Shari‘a it is not a sale. Zayd may repay the loan (qard) and take the house back as a pledge. If Bakr derived benefit from the house during this period of the pledge, that was impermissible — it was interest.

Source: Fatawa Mahmudiyya

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