Question Summary:
What is the Islamic Position on Lay-By?

Question Detail:

assalaam u alaikum
i am looking for an answer on the topic of lay byes in islaam. i searched the ask imaam website and was unable to find anything. please assist me if possible by sending me a link or a write up.
shukran

Answer :

Answer:
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
Definition
Layaway or Lay By is defined as “Layaway (lay-by in Australia, New Zealand and South Africa) is a way to purchase an item without paying the entire cost at once. However, rather than taking the item home and then repaying the debt on a regular schedule, as in most installment plans or hire purchases, the layaway customer does not receive the item until it is completely paid for. There is sometimes a fee associated, since the seller must "lay" the item "away" in storage until the payments are completed. If the transaction is not completed, the item is returned to stock and the customer's money is returned minus a fee.”[1]
According to South African Law, CPA section 62 of 2008, the contractual agreement in a lay- by takes place at the time of complete payment.
Juridical Ruling
According to the laws and principles of Islamic Finance and Economics, a lay - by is not a concluded transaction/sale. The seller agrees to sell the item and the purchaser agrees to purchase the item. The item of sale remains the property of the seller until the transaction is effectuated.
The installments/payments made by the purchaser are regarded as an “Amanat”. The seller cannot use such monies until the prospective deal is concluded.
The transaction will only take place once the purchaser completes payment of the item of sale. This is also in compliance with South Africa Law as espoused in the above.
If the item of sale is lost, it will be the sole loss of the seller and if the money is lost, then it will be the sole loss of the purchaser.
Non-Payment and Penalty Fee’s
A common question that arises is “What if the purchaser does not pay the full amount to the seller?”
The monies received by the seller are considered as “Amanat”. Therefore, the seller would have to return the ‘Amanat” to the purchaser. If the purchaser cannot be reached for some reason and there is no way of contacting him, then the money should be dispensed as Sadaqah (charity).
South African law stipulates that the seller has the right to charge a 10% penalty fee if the purchaser does not make complete payments.
This is not Shari’ah Compliant since the seller would have an unfair advantage over the purchaser by charging him a penalty fee.
 And Allah Ta’āla Knows Best
Moulana Ismail Desai,
Student Darul Iftaa
Durban, South Africa
Checked and Approved by,
Mufti Ebrahim Desai.