SEMESTER II 2023/2024

BACHELOR OF BUSINESS ADMINISTRATION

(ISLAMIC FINANCE) - BBAIF6B

FBF30103 ADVANCED FIQH MUAMALAT

GROUP ASSIGNMENT
TOPIC: SHUF’AH

PREPARED BY: GROUP 12

NO NAME NO. MATRIC

1 NURIN IZZATI BINTI ABDUL KARIM 066435

2 NURUL IZZAH HANANI BINTI TAUFEK 066879

3 NUR ZULAIKHA BINTI ROZANI 067029

4 SHARIFFAH NOOR ALIA BINTI SYED HAMZAH 068391

5 NIK YASMIN SOFIA BINTI NIK SHAMSUDDIN 068397

PREPARED TO:
PROF MADYA DR MOHD SADAD BIN MAHMUD
 TABLE OF CONTENTS

1.0 DEFINITION 1
2.0 LEGITIMACY OF SHUF’AH 2
2.1 HADITH 2
2.2 CONSENSUS (IJMA) 3
3.0 PILLARS OF SHUF’AH 4
4.0 CONDITION OF SHUF’AH 4
5.0 ISSUES RELATED TO SHUF’AH 5
6.0 CONCLUSION 6
7.0 REFERENCES 7
1.0 DEFINITION

In Arabic terms, Shuf’ah means “joining” or “amalgamation”. It gives individuals the

right of pre-emption in property sales, ensuring that individuals or entities with existing interests
in a property or asset have the right to purchase the share before it is sold to a third party.
Fundamentally, Shuf’ah gives a co-owner of a property the right of preference to buy the share
that another co-owner is selling before it is made available to outsiders. This right gives
co-owners a sense of security and control, allowing them to keep their current ownership
structure while perhaps preventing the arrival of an unknown neighbor.

There are two basic contexts for Shuf’ah. The first is co-ownership, which implies that if
an individual co-owns a property with someone and decides to sell their portion, Shuf’ah gives
the individual first priority in purchasing that share. This helps to sustain co-ownership among
people who have previously made an investment in the property or asset. The second context is
neighbor. In some interpretations of Shuf’ah, a neighbor may have the right to purchase a
property before it is sold to an outsider or third party. This could help avoid problems with an
unfamiliar neighbor and encourage healthy neighborly relations.

The purpose of Shuf’ah is to preserve the interests of existing co-owners. The arrival of a
new owner, particularly an outsider, could disrupt these established patterns. Shuf’ah reduces this
risk by offering the co-owner the first opportunity to purchase the selling share, potentially
avoiding disagreements or hassles caused by an unfamiliar co-owner. Shuf’ah application has
some limitations. It is mostly applicable to immovable property, such as land and buildings.

The particular circumstances and processes for practicing Shuf’ah may differ based on
the Islamic legal school (Mazhab) used. For example, the Maliki, Shafi’i, and Hanbali schools
limit Shuf’ah to co-owners, whereas the Hanafi school allows neighbors to participate as well. In
practice, the shuf’ah process often entails notifying current stakeholders of an upcoming
property sale or transfer and allowing them to exercise their right of pre-emption by matching the
terms given by the prospective buyer. This ensures that their interests are protected and that they
have an equal opportunity to keep or enhance their ownership stake.

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2.0 LEGITIMACY OF SHUF’AH

Based on Islamic principles and governed by Islamic law, shuf'ah is considered

legitimate. While it is a common myth that Muslim scholars universally agree on its
permissibility, Jabir ibn Zaid, an acknowledged figure among the tabi'in, rejected its legitimacy,
as pointed out by al-Rafi'i. Despite these differences of opinion, the Sunnah (the customs and
practices of the Prophet Muhammad) as well as the unanimous agreement of scholars serve as
the foundation for the validity of shuf'ah. The dependence of Islamic jurisprudence on reliable
sources provides it legitimacy and authority.

2.1 HADITH

Imam Bukhari narrated from Jabir bin Abdillah RA said:

َ‫ش ْف َعة‬
ُ ‫ق فَاَل‬
ُ ‫ط ُر‬ ُ ‫س ْم فَِإ َذا َوقَ َعتْ ا ْل ُحدُو ُد َو‬
ُّ ‫ص ِّرفَتْ ال‬ ٍ ‫ش ْف َع ِة فِي ُك ِّل َم‬
َ ‫ال لَ ْم يُ ْق‬ َ ‫صلَّى هَّللا ُ َعلَ ْي ِه َو‬
ُّ ‫سلَّ َم بِال‬ َ َ‫ق‬
َ ‫ضى رسول هللا‬

This narration emphasizes that the Prophet Muhammad (peace be upon him) established
the concept of shuf'ah for undivided property. However, once the boundaries have been
delineated and the road has been arranged, the right of preemption or shuf'ah, no longer applies.
This underscores the conditional nature of shuf'ah, which is recognized until the property is
properly demarcated and accessible, after which it ceases to be applicable.

Another hadith Imam Muslim narrated from Jabir RA, he said:

ْ‫ش ِري َكهُ فَِإن‬ َ َ‫ الَ يَ ِح ُّل لَهُ َأنْ يَبِي َع َحتَّى يُْؤ ِذن‬.‫س ْم َر ْب َع ٍة َأ ْو َحاِئ ٍط‬ ِ ‫ش ْف َع ِة فِى ُك ِّل‬
َ ‫ش ْر َك ٍة لَ ْم تُ ْق‬ ُّ ‫سو ُل هَّللا ِ صلى هللا عليه وسلم بِال‬ َ َ‫ق‬
ُ ‫ضى َر‬
‫ق بِ ِه‬ ُّ ‫شَا َء َأ َخ َذ وَِإنْ شَا َء تَ َر َك فَِإ َذا بَا َع َولَ ْم يُْؤ ِذ ْنهُ فَ ْه َو َأ َح‬

The Hadith from Sahih Muslim (Hadith no. 1608) narrates that the Prophet Muhammad
(peace be upon him) instituted the principle of shuf'ah in all shared properties that have not yet
been divided, regardless of whether it is a house or a garden. According to this narration, it is not
permissible for an individual to sell such property until they inform their co-owner or partner.

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 The co-owner then has the option to exercise their right to purchase the property if they
so desire, or they may choose to relinquish this right. If the property is sold without informing
the co-owner, the co-owner still retains the superior entitlement to it. This Hadith emphasizes the
importance of mutual consent and respect for the rights of co-owners in jointly owned property.

Another hadith underlines the importance of neighborhood rights in Islamic law

regarding property transactions. (HR. Tirmidhi and Abu Dawud. This hadith was authenticated
by Sheikh Al Albani in Al Irwaa' no. 1539):

ُّ ‫َجا ُر الدَّا ِر َأ َح‬

‫ق بِالدَّا ِر‬

This narration means The rights of a neighbor over their home are paramount, The
Islamic concept of "shuf'ah" places a strong emphasis on creating peaceful relationships within
communities, maintaining justice, and respecting and giving neighbors' rights priority in property
transactions. This idea, which has its roots in Islamic teachings, represents the larger philosophy
of social duty and community well-being, emphasizing the importance of neighborly kindness
and respect for others.

2.2 CONSENSUS (IJMA)

Ibn Al-Mundhir states that scholars agree that the partners who do not participate in
defining the boundaries of their property—whether it be real estate, land, or gardens—have the
right to do so. This consensus reflects the understanding that, even in the absence of their
participation in boundary creation, such partners have the right of preemption.

On the other hand, Al-Asamm disputes this consensus, arguing that preemptive rights
might harm property owners by discouraging prospective purchasers and thereby driving up
property owners' prices. Al-Asamm's perspective, however, was disregarded since it went against
the strong Hadith tradition and the consensus that the scholars had formed before the appearance
of this disagreement.

This rejection emphasizes how important it is for Islamic jurisprudence to follow

authentic Hadith sources and acknowledge scholarly agreement for the purpose of maintaining
the fundamental ideas of Islamic law as the basis for legal interpretations.

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3.0 PILLARS OF SHUF’AH

Shuf'ah consists of three pillars, namely:

1. Shafi’
Shafi’ is a person who has the right of shuf'ah or old partner (syarik qadim), who has the
right to buy forcibly from a new partner.

2. Mashfu’ alaih
Mashfu’ alaih is a new partner who buys shared assets.

3. Mashfu' fihi
1. Mashfu 'fihi is a shared item that is the object of the shuf'ah contract.
2. The property is required to be an immovable property (such as house, land and
others).
3. The immovable property must be in a form that can be distributed (i.e. when
divided, it can still provide the required service)
4. But if the division renders the service unusable, then the property cannot be
distributed.
5. Movable property (such as furniture, cars, etc.) cannot be given the right of
shuf'ah.

4.0 CONDITION OF SHUF’AH

1. Ownership or partnership: The right of preemption (mashfu’ fihi) usually applies to

partners or co-owners (shafi’) in a property.
2. Notification: The owner intending to sell must inform the co-owners (shafi’) about the
intended sale and offer them under the same terms and conditions to the third party
(mashfu’ alaih)
3. Acceptance within a specified time: The co-owners (shafi’) must accept the offer within
a specified time frame.
4. Equal terms: The offer made to the co-owners (shafi’) should be on equal terms.

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5.0 ISSUES RELATED TO SHUF’AH

Shuf'ah or known as right of pre-emption in Islamic finance has been in the discourse
among scholars for over a few years recently, especially regarding its principles and applications
in real estate transactions. The varying scholars’ opinions on applications of shuf’ah have led to
a variety of issues. Issues that are related to the applications of shuf’ah are shown and elaborated
below:

a) Contemporary land law

Sait and Tempra (2015) argued in their research that the shuf’ah doctrine, granting the
right of pre-emption for real estate transactions has been incorporated as the key Islamic land
consolidation tool by the modern Muslim dynasties like Safavids and Sokotos. However, this
practice clashed with the free-market approach favored by colonial powers during their era of
land acquisition. Today, contemporary land developers might find Shuf'ah to be a hurdle as it
limits potential pools of buyers. The recent practice of shuf’ah in Muslim countries has been
modernized to adapt to the contemporary setting where the procedures are integrated into the
existing conventional frameworks.

b) Intangible assets

The AAOIFI Standard classifies that shuf’ah itself is an intangible asset, which means
shuf’ah as a right of pre-emption is granted and is not permitted to be transferred to another party
through sale. A simple analogy using modern context is explained, for example, due to their
proximity as neighbors, Sharif and Yazid all have shuf'ah rights on each other's properties.
Should Sharif sell his land, Yazid's shuf'ah right remains non-transferable to others as shuf’ah
can only be applied to neighbors or co-partners of the property. It emphasizes shuf’ah’s role in
ensuring fairness and protecting the interests of neighbors or joint owners of the property.

c) Joint seller housing finance

The shuf’ah or right of pre-emption of a property becomes void when mortgage

liquidation occurs. For reference, a property that is owned through a profit-sharing model
between bank and co-owners, shuf’ah is not applicable as the entire co-owned property
(including the client’s share) is sold to settle the bank's outstanding debt.

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6.0 CONCLUSION

In conclusion, Shuf’ah, commonly known as the right of preemption in Islamic finance,

plays an important role in property transactions under Islamic law. Shuf’ah not only gives
co-owners a sense of security and control, but it also seeks to protect established ownership
systems and minimize disruptions produced by unfamiliar neighbors or outsiders. Shuf’ah
legitimacy is deeply rooted in Islamic concepts and is governed by Islamic law. Despite
historical differences among scholars, the reliance on authentic Hadith sources and scholarly
consensus strengthens its credibility. The Hadith literature, particularly that narrated by Imam
Bukhari and Imam Muslim, highlights the Prophet Muhammad’s institution of Shuf’ah for
undivided property, as well as the significance of mutual consent and respect for co-owners
rights.

Shuf’ah is based on three pillars, Shafi’, Mashfu’ alaih, and Mashfu’ fihi, which define
the duties and requirements of the parties involved in the preemption process. Various
restrictions imposed by jurists safeguard the fairness and validity of Shuf’ah transactions,
including the requirement for the property to be immovable and the Shafi’ objection to the sale.
However, the use of Shuf’ah in contemporary situations presents several challenges and issues.
Shuf’ah may conflict with colonial powers’ preferred free-market principles in modern land law,
thus limiting the pool of buyers in real estate transactions. Furthermore, Shuf’ah classification as
an intangible asset under AAOIFI rules, as well as its exclusion in joint seller home finance
situations, complicates its deployment.

Despite these issues, Shuf’ah remains an important part of Islamic finance, aiming to
provide justice, fairness, and societal cohesiveness in property transactions. Shuf’ah ideas and
practices attempt to balance co-owners’ rights and interests while maintaining established
ownership structures and building harmonious relationships within communities. As Islamic
finance evolves, overcoming these problems and improving the use of Shuf’ah in modern
situations will be critical to maintaining its relevance and efficiency in facilitating property
transactions while adhering to Islamic principles.

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7.0 REFERENCES

Pejabat Mufti Wilayah Persekutuan - AL-KAFI LI AL-FATAWI SIRI KE-438: HARTA SYUF’AH.
(2016, November 10).
https://www.muftiwp.gov.my/en/artikel/al-kafi-li-al-fatawi/1864-al-kafi-li-al-fatawi-siri-ke-438-h
arta-syuf-ah

Uddin, Md.Akther. (2016). Principles and Application of Preemption in Islamic finance: A

critical analysis SHUFA'H IN SHARIAH, ITS RULES AND APPLICATION IN BUSINESS.
https://www.researchgate.net/publication/299466364_Principles_and_Application_of_Preemptio
n_in_Islamic_finance_A_critical_analysis_SHUFA'H_IN_SHARIAH_ITS_RULES_AND_APP
LICATION_IN_BUSINESS

Taha, Mohd & Awang, Mohd & Sulong, Jasni & Ruzulan, Zulaipa & Mohamed, Asjad & Jusoh,
Mohd Kamal Azman & Ayub, Mohd. (2019). Syuf'ah in Islamic Laws and its Significance Under
the Land Law of Malaysia. The Journal of Social Sciences Research. 603-607.
10.32861/jssr.53.603.607.