Shabbat Parashat Terumah | 5770
Ask the Rabbi: Discount on Rent for Apartment on the Process of Purchase
Question: I sold an apartment to a ben Torah. There was a payment at the signing, and additional payments at different dates. As of Dec. 1, the apartment was ready to be transferred if all the payments could be made. This depended on getting the mortgage and certain legal issues cleared up by then. By no fault of either side, the final payment took place several weeks later. An uncommon thing that we did is that we wrote a clause allowing the buyers to move into the apartment well before Dec. 1, but they had to pay the same rent the outgoing renters did. They did not pay in advance, and I figured they would take care of it together with the final payment. At that time, the buyer said that he thought he had to pay rent only until Dec. 1, when it was envisioned that the transfer might be made. He argued that although the payment was not completed, the majority of the money had already been paid. He said, though, that he would accept the ruling of any rabbi I want to ask. I would like to ask you (and am attaching a copy of the contract). I am pretty sure I am right, but considering he did give so much money and in the scheme of all the money changing hands, I don't want this relatively small amount to leave a bad taste. Thus, I would be happy if you would suggest a p'shara (compromise), assuming I am correct
Answer:Without going into a rigorous analysis of the contract [which is written in Hebrew], it is apparent that Dec. 1 was not the time the sale was completed but the time it could have been completed had the money been ready. If there had not been a clause about renting before the sale was complete, the buyers could not have demanded the keys before that date, even though a large part of the money had been paid. Regarding payment of the rent, there is logic (although we will see problems with that below) to pay at a prorated manner, according to the percentage of the money that was not yet paid. However, since the price of rental is mentioned without mention of prorating it, it is apparent that when the apartment is not yet theirs, they have to pay in full.
Now we must jump from Choshen Mishpat (monetary law) to Yoreh Deah (mainly, ritual law). You express uneasiness that the buyer gave a lot of money toward the apartment and yet had to pay full rent until the sale was complete. Making down payments is advancing money. Although it has other financial logic, there is an element of this advance that makes it considered as a loan that the buyer gives to the seller prior to the sale. Therefore, the buyer must not receive actual monetary reward for advancing the money, for that reward would be “ribbit” (interest on a loan).
Therefore, for example, if two agree that the price of an apartment is $250,000 but if the buyer advances a lot of money, the price will be $240,000, this condition makes the $10,000 discount a $10,000 interest payment (Rama, Yoreh Deah 173:7). Two ways of avoiding the problem are discussing the type of payment schedule first and then negotiating the exact price based on that, or using a heter iska.
In your case as well, if you say that despite being legally correct, since so much money was advanced, it is unfair to take full rent, the rent discount would be ribbit for the prepayment. If each payment were halachically considered an acquisition of a percentage of the home, the relative discount would be justified, but neither the contract nor the apparent oral discussions indicate it. If there were a halachic doubt whether you or the buyer were right, a discount could be considered a compromise on the legal question and not ribbit. However, since the contract indicates that you are correct, it would be a rabbinical violation of ribbit to forgive the buyer the full rent agreed upon. It would be a Torah violation only if the decision to take “interest” was set at the time of the “loan” (Shulchan Aruch, YD 161:5). The main difference is that regarding rabbinical ribbit, if the payment was already made, the “lender” does not have to return the interest to the borrower (ibid.:2).
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