Cancellation Of A Lease/Rental Agreement

The Fuqaha (jurists) have mentioned that cancellation of a hiring (lease) agreement is acceptable in terms of Shariah due to certain factors. The jurists have stated that if the objective of the hirer (in this case, the tenant) is not fulfilled then he is entitled to cancel the lease agreement.

The primary objective and purpose of conducting business is to acquire profit from which the businessman is able to meet his overheads and fulfill his personal needs and requirements. If the business is unable to generate profits for whatever reason, and in fact running at a loss to the extent that he is unable to meet his overheads and fulfill his needs, then the objective of running the business is not being fulfilled, which brings us to the conclusion that the tenant has valid grounds to cancel the lease agreement.

Just to expound a little further on this point we will mention a few example cited by the Fuqaha so that this point is clearly understood. Fataawa Hindiyya states, if a man (dentist) was hired to remove someone’s tooth due to experiencing pain, but subsequently the tooth healed even prior to the dentist attending to him, then the hiring agreement between the two parties will be considered to be cancelled. There is no purpose in hiring the dentist any longer as the patient is no longer in need of his services.

Another example cited by the Fuqaha, a man hired an animal to transport him to Baghdad to locate a debtor or to search for a run-away slave, but before embarking on the journey, the debtor or the run-away slave crops up, the hiring agreement will again be considered as cancelled. Again, this is due to the fact that the hirer no longer requires the services of the transporter. 

After understanding the above explanation, we too conclude by stating that if the business is no longer a profitable enterprise rather it is a white elephant then the tenant has valid grounds to cancel his existing lease agreement in terms of Shari’ah, as he has no purpose in pursuing occupation of the premises.

The agreement to rent the premises was in simple terms a promise from the side of the lessee on the assumption that the business will prove to be profitable and fruitful. Now that the lessee finds himself in an adverse situation and is informing the lessor that he will no longer be able to honour his promise (as the business has already closed down), the lessor as a Muslim should assist and absolve the lessee of his obligation. We are sure that the lessor has benefitted from the income of the lessee for a few months, thus freeing the lessee of his obligation should be considered and particularly when the lessee has been afforded the right of cancelling the lease in terms of Shari’ah as explained above. Perhaps others will hire the premises if lying vacant. Similarly, the jurists have stated that if the lessee is bankrupt then he has further grounds to cancel the lease agreement.