SHARIAsource

This fatwa defines a registered mortgage (rahn tasjily) as a guarantee (or collateral) in the form of an object in lieu of a debt. The collateral is transferred pursuant to an agreement stating that the object transferred to the mortgagee (murtahin) is only the proof of legal ownership, while the collateral (marhun) is to remain in the physical control, and at the disposal, of the mortgagor (rahin).

The fatwa states that rahn tasjily may be conducted pursuant to the following provisions:

1. the mortgagor transfers proof of legal ownership of an object to the mortgagee, which becomes collateral;
2. transfer of the collateral in the form of proof of legal ownership or a certificate does not transfer ownership to the mortgagee;
3. the mortgagor provides the mortgagee with the authority to sell the collateral, either via auction to to another party pursuant to shari'a principles, in the event of a default or inability to repay the relevant debt;
4. usage/disposal of the collateral by the mortgagor must be fair and in accordance with the parties' agreement;
5. the mortgagee may incur maintenance and storage fees, which are to be borne by the mortgagor, pursuant to an ijarah (rental) agreement;
6. the quantum of those fees is not to be related to the quantum of the debt owed;
7. the mortgagee may incur other necessary and incidental costs; and
8. the relevant insurance is to be covered by the mortgagor.