Can a Muslim Landlord Keep All the Rent on a UK Islamic Buy to Let? The Bank's Share, the Tenant's Rent and the Surplus Abu Hanifah Would Give to Charity: A Sharia Analysis for Muslim Investors (2026)

Verdict: Rent on the landlord's own share of the property is ordinary halal rent. On the bank's share, the landlord is sub-letting, and the schools of law differ. AAOIFI Standard 9, the Shafi'i school and the preferred Hanbali view allow a higher rent. Abu Hanifah sent the surplus to charity unless the landlord added something to the property or charged in another currency. Mufti Taqi Usmani prefers Abu Hanifah's view but allows the other in cases of need. The question is open.

Gatehouse Bank's five year fixed buy to let plan for UK residents carries an initial rental rate of 6.09 percent. The bank does not lend. It buys part of the property and leases that part to the landlord, who finds a tenant.

So the landlord holds two positions at once. On one share, the landlord is an owner who lets property. On the other, the landlord is the bank's tenant and lets the property on. Fiqh, or Islamic jurisprudence, treats the two differently.

Whether home purchase plans are halal at all is the subject of the analysis of UK home purchase plans. Exit charges, which also apply to buy to let plans, are in the analysis of overpayment and early settlement. Zakat is the obligatory yearly charity on wealth. The guide to zakat covers rental income. This article takes all three as read and asks one question: how much of the tenant's rent may the landlord keep?

What a Buy to Let Purchase Plan Actually Is

Gatehouse Bank's Shariah Supervisory Board certified its individual buy to let documents on 27 January 2022. The certificate says they are "based on Diminishing Musharakah suite of documentations". Diminishing musharakah is a partnership that one partner gradually buys out. The documents include a "Lease". Ijarah is a lease of an asset for rent.

Gatehouse's criteria guide for UK residents, effective 12 August 2026, gives an example in which "the Bank may contribute 75% and the applicant 25% of the purchase price". Then "The Bank will lease its share in the property to the applicant for the duration of the finance term."

The landlord chooses Acquisition and Rent, where each payment buys part of the bank's share, or Rent Only. On Rent Only, the landlord's share stays the same, and "The applicant must acquire the Bank's share in the property at the end of the agreed term by making a full lump sum Acquisition Payment." On a sale, Gatehouse's FAQs set the price at "the same as the original amount the Bank contributed", less acquisition payments. The analysis of a falling market covers what that price means when values fall.

The Property Question

The landlord owns one share and leases the other. AAOIFI Shari'ah Standard No. 9, Ijarah and Ijarah Muntahia Bittamleek (issued 16 May 2002), describes this arrangement in clause 3/6:

"An Institution's customer may jointly acquire an asset that he wishes to lease with the Institution, and then lease the Institution's share of the asset from the Institution. In this case, the rental specified as receivable by the Institution should only be in proportion to its share in the ownership of the asset, since the lessee is a co-owner of the asset and therefore has to pay rent only on the share that he does not own."

AAOIFI Shari'ah Standard No. 12, Sharikah (Musharakah) and Modern Corporations (issued 16 May 2002), agrees in clause 5/9. It permits either partner "to rent or to lease the share of the other partner for a specified amount and for whatever duration". The clause adds that each partner stays responsible for the periodical maintenance of his share.

Usmani confirms that this first lease is not disputed. In An Introduction to Islamic Finance (1998, p. 60), he writes that "there is no difference of opinion among the Muslim jurists in the permissibility of leasing one's undivided share in a property to his partner."

He adds that Abu Hanifah and one of his students did not allow an undivided share to be leased to a third party. The buy to let tenant, however, rents the whole house. On this article's reading, that objection does not reach the tenancy. No source read addresses the case directly.

AAOIFI's Appendix B to Standard 9 cites Surah Al-Qasas, verse 26, as a Qur'anic basis for ijarah:

قَالَتۡ إِحۡدَىٰهُمَا يَٰٓأَبَتِ ٱسۡتَـٔۡجِرۡهُۖ إِنَّ خَيۡرَ مَنِ ٱسۡتَـٔۡجَرۡتَ ٱلۡقَوِيُّ ٱلۡأَمِينُ

"One of the women said, "O my father, hire him. Indeed, the best one you can hire is the strong and the trustworthy."" (Saheeh International)

The verse concerns hiring a person. AAOIFI cites it for ijarah in general.

The Riba Question

Riba is an increase charged on a debt or loan. Post 23 covers the rent paid to the bank. The question here is the rent the tenant pays the landlord. On the landlord's own share, an owner earns rent for a use the owner provides.

On the bank's share, the landlord is a sub-lessor. A sub-lease is a lease granted by someone who is a tenant. The tenant's own lease is the head lease. Standard 9 clause 3/3 reads in full:

"A lessee of an asset may enter into a sub-lease contract with a party other than the owner for a rental that is either the same, lower or higher, payable either currently or on a deferred basis, unless the owner stipulates that the lessee should not assign or sublet the property to third parties, or should not do so without his approval."

The clause permits a higher rent. Its proviso lets the owner forbid sub-letting or require approval. On this article's reading, a buy to let plan exists for letting, so approval is its premise. Gatehouse's lease is not public, and this article has not read its sub-letting clause.

Usmani sets out the classical positions in the same book (pp. 123 to 124). If the sub-lease rent is "equal to or less than the rent payable to the owner", all the schools agree it is permissible. On a higher rent, "the opinions are different". Imam al-Shafi'i "and some other scholars allow it and hold that the sub lessor may enjoy the surplus", and "This is the preferred view in the Hanbali school as well."

Abu Hanifah, founder of the Hanafi school, took the other view. In Usmani's words, the surplus "is not permissible for the sub-lessor to keep and he will have to give that surplus in charity." Usmani reports one exception: "if the sub-lessor has developed the leased property by adding something to it or has rented it in a currency different from the currency in which he himself pays rent to the owner/the original lessor, he can claim a higher rent from his sub-lessee and can enjoy the surplus."

How large is the surplus? As an approximation, take the monthly rent to the bank as the bank's share times the rental rate, divided by 12. Gatehouse says only that rent "is calculated according to the respective shares owned". Take a £250,000 flat, with the bank at 75 percent, or £187,500, and the landlord at 25 percent, or £62,500. On Rent Only at 6.09 percent, the rent to the bank is 187,500 times 0.0609, or £11,418.75 a year. That is £951.56 a month.

Suppose the tenant pays £1,400 a month. Split in proportion to ownership, the bank's share takes 0.75 times 1,400, or £1,050. The landlord's own share takes 0.25 times 1,400, or £350. The surplus is the bank's share of the tenant's rent minus the rent paid to the bank. Here that is 1,050 minus 951.56, or £98.44 a month, and £1,181.25 a year.

The pro rata split is this article's method, not a ruling. Standard 9 clause 4/2/4 splits a sub-lease rent pro rata between co-lessees, so its use here is an analogy.

The surplus comes from the yield. The tenant's £16,800 a year on a £250,000 flat is a gross yield of 6.72 percent, above the bank's 6.09 percent.

The Gharar Question

Gharar is uncertainty in the essential terms of a contract. Standard 9 clause 5/2/1 requires the rental to be "specified". The 6.09 percent rate is fixed for five years, so the first period's rent is known.

The follow-on rate is "SVR + 1%". The SVR, or standard variable rate, is 7.25 percent in the June 2026 product guide. On this article's reading, the follow-on rate is 7.25 plus 1, or 8.25 percent.

Standard 9 clause 5/2/3 first permits later rentals to follow a benchmark that rests on "a clear formula which is not subject to dispute". It then adds: "This benchmark should be subject to a ceiling, on both maximum and minimum levels." The product guide shows no ceiling. The offer letter may contain one. This article has not seen it.

The rate change also removes the surplus. At 8.25 percent, the rent to the bank becomes 187,500 times 0.0825, or £15,468.75 a year. That is £1,289.06 a month, against the £1,050 that the bank's share brings in. The landlord now pays £239.06 a month more than that share earns.

The tenant's rent is uncertain too, because tenants leave and fall into arrears. Standard 9 clause 4/1/1 makes a lease "a binding contract which neither party may terminate or alter without the other's consent". On this article's reading, the landlord owes the bank's rent whatever the tenant pays.

The bank tests that risk before it lends, with a Financial Services Coverage Ratio (FSCR). The guide does not define the ratio. This article reads it as the tenant's rent divided by the payment to the bank. On a standard buy to let, Gatehouse requires 125 percent for a basic rate taxpayer or a limited company. It requires 145 percent for a higher or additional rate taxpayer. A five year fix is tested at its initial pay rate.

On the example, the minimum rent is 1.25 times 951.56, or £1,189.45, at 125 percent. At 145 percent, it is 1.45 times 951.56, or £1,379.77. The £1,400 rent covers both, at about 147 percent. At 8.25 percent, coverage falls to about 109 percent.

The Maysir Question

Maysir is gain that turns on chance, as in gambling. A landlord takes ordinary commercial risk on a tenant and a property. On this article's reading, the maysir screen is not engaged.

Where Scholars Differ

The positions turn on one question. Is the surplus profit on something the sub-lessor owns, or on something whose risk stays with the owner?

The first position is AAOIFI's. Standard 9 clause 3/3 permits a sub-lease rent that is "the same, lower or higher". Usmani reports the Shafi'i and preferred Hanbali view to the same effect. On this reading, the landlord owns the use of the bank's share for the term. The landlord may let that use at the market rent.

The second position is the Hanafi rule as Mufti Faraz Adam applies it. In an undated answer on darulfiqh.com, he writes that subleasing "is permissible unless it has expressly been disallowed by the landlord." On rent, "it should be equal to or less than the agreed amount". To charge more, the tenant should change the currency, or "develop the lease asset or add an extra facility to the property." He adds that "the addition must not contravene the terms and conditions of the lease contract."

A second answer on darulfiqh.com, dated 17 September 2023, was written by a trainee mufti and "Reviewed and approved by Mufti Faraz Adam". Usufruct is the right to use an asset. The usufruct passed to the sub-tenant is "identical" to the one the head lease delivered. The risk of the property stays with the owner. So "the surplus is not in lieu of anything." Citing a classical Hanafi authority, the answer calls it riba.

A landlord who charges in the same currency and adds nothing "must give away any surplus as purification payments."

That answer also widens the exception. A mark-up is allowed if the landlord adds "additional assets, white goods, or accessories" or provides "an additional service to the sub-tenant". The Arabic passages it quotes, in this article's translation, accept plastering or repairing doors and walls. Sweeping done before the let does not count, because it leaves nothing behind. It counts if the landlord promises it as a service in the new lease.

The third position is Usmani's own, between the two: "Although the view of Imam Abu Hanifah is more precautious which should be acted upon to the best possible extent, in cases of need the view of Shafi'i and Hanbali schools may be followed because there is no express prohibition in the Holy Qur'an or in the Sunnah against the surplus claimed from the lessee."

No source read answers three questions:

Whether a pro rata split of the tenant's rent is the right way to measure the surplus.
Whether ordinary letting work, such as furnishing, management or statutory repairs, counts as the Hanafi addition.
Whether the surplus test runs month by month or over the whole term.

A search of joebradford.net found no article by Sheikh Joe Bradford on sub-letting or on keeping a rent surplus. This article attributes no position to him.

What Remains Impermissible

The first limit is the tenant's use. Standard 9 clause 5/1/1 states that "a house or a chattel may not be leased for the purpose of an impermissible act by the lessee". Clause 5/1/3 allows a lease "even with a non-Muslim, if the use to be made of it is permissible, such as a house for residential purposes". The exception is where the lessor knows, or has reason to presume, that the use will be impermissible.

Selling the rent stream is a second limit. Usmani (p. 124) writes that assigning a lease without the asset "for a monetary consideration is not permissible." He rejects "head-leasing", in which a lessee sells shares in sub-rentals for a fixed sum (p. 126). That, he writes, "amounts to selling a receivable debt at a discount".

Sub-letting without consent is a third limit. Gatehouse treats letting a home bought on a residential plan as a "change of use" that the bank must assess. Where the contract requires approval, Standard 9 clause 3/3 makes it a condition of the sub-lease.

Practical Guidance

Before you sign. Ask the bank to show the sub-letting clause in the lease. Ask whether the follow-on rate has a ceiling or a floor. Get both answers in writing.

If you follow AAOIFI or the Shafi'i or Hanbali view. You may keep any surplus. Check that the tenant's use is lawful.

If you follow the Hanafi rule. Work out the surplus each year. On this article's pro rata method, take the bank's share of the tenant's rent. Subtract the rent you paid the bank. If you added nothing to the property, give any surplus to charity.

If you want the Hanafi exception. Let the property with white goods or other furnishings. Write any service to the tenant into the tenancy. Check that the bank's lease allows the addition. Ask a scholar whether your addition counts.

On an Acquisition and Rent plan. Recalculate as the bank's share falls. Each acquisition payment lowers the bank's rent and changes the split.

If you invest the surplus. Screen what you buy. Use the stock screener for listed shares and the crypto screener for digital assets. The comparison of halal asset classes sets out what each one carries.

Conclusion

A buy to let purchase plan gives the landlord two kinds of rent from one tenancy. Rent on the landlord's own share is the rent of an owner, and no source cited here disputes it. Rent on the bank's share is the rent of a sub-lessor, and the schools differ on any surplus.

In the example, the surplus is £98.44 a month at the fixed rate and disappears at the follow-on rate. Whether it is owed to charity depends on the school followed and on what the landlord provides. That question is open.

This article is educational. It is not a fatwa, which is a formal religious ruling, and it is not financial advice.

Frequently Asked Questions

1. Is rental income from a buy to let purchase plan halal?

On your own share, yes, on every source read here. On the bank's share, AAOIFI Standard 9 clause 3/3 permits a higher rent. The Hanafi school differs on the surplus.

2. What is the surplus?

It is the bank's share of the tenant's rent, minus the rent you pay the bank. In the example, 1,050 minus 951.56 gives £98.44 a month.

3. Do I have to give the surplus to charity?

Under Abu Hanifah's view, yes, unless you added something or charged in another currency. Under AAOIFI and the Shafi'i and Hanbali view, no. Usmani allows the second view in cases of need.

4. Does letting with white goods change the answer?

It may. A 2023 darulfiqh.com answer approved by Mufti Faraz Adam names white goods as an addition. Ask a scholar about your own case.

5. Can I let my home purchase plan property without telling the bank?

Not where the contract requires approval. AAOIFI Standard 9 clause 3/3 makes that approval a condition. Gatehouse treats letting a home as a change of use.

6. Can I let to a non-Muslim tenant?

Yes, for a lawful use. AAOIFI Standard 9 clause 5/1/3 permits a lease "even with a non-Muslim". The use must be permissible, such as a home.

7. Why does the bank test the tenant's rent?

On this article's reading, the test checks that the rent covers the bank's payment with a margin. Gatehouse requires 125 percent for a basic rate taxpayer. It requires 145 percent for a higher rate taxpayer.