Story LineSmall ResortRabbi Meir Orlean
The Goldbergs decided to go to the mountains for the weekend. They contacted an agent regarding a rental house.
“We need at least four bedrooms,” Mr. Goldberg said. “We have three boys and three girls and a married couple who need their own room.”
“I have a house with four bedrooms,” said the agent. After some bargaining, they settled on a price.
The Goldbergs arrived three hours before Shabbos. The boys bounded out of the car and ran inside to choose a bedroom. Upstairs they saw a master bedroom, obviously for the parents. They found two other bedrooms.
“Where’s the fourth bedroom?” they asked one another.
They ran back downstairs. There was a kitchen, a dining room and living area, but no bedroom.
“There are only three bedrooms,” they announced. “Where are we all supposed to sleep?”
“This is a problem,” Mr. Goldberg said to his wife. “I asked the agent and he told me that there were four bedrooms.”
“Call the agent and see if there is another house nearby,” said Mrs. Goldberg.
Mr. Goldberg tried calling the agent, but there was no answer.
“We don’t have much choice now,” Mr. Goldberg said. “It’s too late to get back to the city and there’s no better option here. I’ll take it up with the agent when we return.”
Mrs. Goldberg called the boys over. “I’m sorry, there was a mistake,” she said. “You’ll have to sleep in the living room. There’s a couch and extra mattresses in one of the rooms. We’ll arrange the Shabbos clock so that you can sleep.”
After Shabbos, Mr. Goldberg prepared to speak with the agent. He felt that they had been overcharged and planned to demand a significant discount from the price they had agreed on.
Mr. Goldberg decided to consult Rabbi Dayan first. “What are my rights if the rental was smaller than advertised?” he asked. “Can I claim that I was overcharged?”
“The Gemara (B.M. 56b) teaches that the laws of onaah (unfair pricing) apply also to rental,” replied Rabbi Dayan. “However, it also teaches that claims of onaah do not apply to real estate, whether purchase or rental” (C.M. 227: 29, 32, 35).
“So I can’t claim that he misled me in the rental?” asked Mr. Goldberg.
“We differentiate between an exaggerated price (onaah) and defective merchandise (mekach ta’us),” explained Rabbi Dayan. “If the real estate was not as advertised, in a manner that cannot be rectified, that is considered defective merchandise. Mekach ta’us applies also to real estate” (C.M 232:4; Sma 218:27, 232:2).
“The consumer who received defective merchandise can retract from the sale and invalidate it,” continued Rabbi Dayan. “Similarly, a person who rented a unit of a certain size, and found it is smaller than advertised, can retract from the rental” (Pischei Choshen, Sechirus 4:4).
“What about the fact that we used it?” asked Mr. Goldberg.
“In general, a person who uses the defective merchandise despite the defect voids his claim,” replied Rabbi Dayan. “Since he has no right to use another’s property without permission, through his usage he indicates that he wants to uphold the sale and forgo (mochel) his claim” (C.M. 232:3).
“This does not apply here for a few reasons, though,” continued Rabbi Dayan. “Some maintain that when the customer informs the owner beforehand that he does not forgo his claim of onaah, usage does not void the claim.
“Furthermore, when there is no realistic option not to use the defective item, usage does not necessarily indicate mechilah. Others suggest that usage of a defective rental does not indicate mechilah, since the rental item is intended for usage regardless, even if the initial contract is not upheld” (Pischei Teshuvah 232:1; Pischei Choshen, Sechirus 4:).
“Thus,” concluded Rabbi Dayan, “the initial rental agreement is void and you have to pay only the going rate for a three-bedroom unit” (see Dvar Chok U’mishpat, pp. 78-81).
From the BHI HotlinePrepayment of a Loan
I borrowed money at a rate of 12% per year with a heter iska. After three months I was able to obtain a loan for only 4%. The lender refused to accept the principal plus 3% for the three months of the iska, claiming that I may not pay back the loan before it matured.
Q: Is his claim correct?
A: Generally, a borrower may repay a loan early, even if the lender protests. The due date is intended to benefit the borrower by preventing the lender from demanding repayment early, but the borrower may prepay the loan (C.M. 74:1, 2). However, when the due date benefits the lender as well — for example, the money was loaned with a heter iska to earn a profit, which he will lose if the borrower prepays the loan — the lender may protest prepayment (C.M. 74:3, Sema 7).
Others contend that even with a heter iska, the borrower may prepay the iska. The reason is that when a business owner takes an investor’s money he commits to work to earn profits. Even if they agreed that the investment would continue for a set period, the business owner may prepay the investor since he is an employee, and employees may renege, even in the middle of the term of employment. The Torah decrees that we are servants to Hashem and not servants to people, and thus cannot be compelled to work (C.M. 176:23; Y.D. 176:36).
Similarly, one who borrowed money with a heter iska has made an employment agreement with the lender/investor and agreed to pay a settlement amount to avoid taking an oath about the exact amount that was earned (see Business Weekly #357 for an elaboration). Accordingly, the recipient/borrower may renege on the agreement in the middle of the term by returning the remaining balance (Tumim 74:6 and Shaarei Deah 177:15).
There are authorities who maintain that nowadays the recipient/borrower may not renege because the agreement does not obligate the recipient/borrower to work; the agreement focuses on the payment he makes to avoid taking an oath (Shvus Yaakov 2:184 cited by Pischei Teshuvah, C.M. 176:27; Atzei Levonah 177:36; and Chelkas Yaakov 3:201). Many other authorities disagree since the fundamental element of a heter iska is the commitment to work to generate profits, and thus the recipient/borrower may renege on the agreement.
Another school of thought contends that the matter depends on whether the recipient/borrower is willing to take an oath or produce witnesses regarding the profits earned, in which case he can renege on the agreement. When he wants to pay the settlement rather than take an oath, he must pay the full, agreed-upon amount that would have been earned had the agreement remained in force until the end of the terms. The investor/lender may assert that his agreement to the settlement was established in consideration of the duration of their partnership and refuse to take less because the recipient/borrower wants to renege on the agreement (Nesivos 74:4 and Pischei Teshuvah, Y.D. 176:27).
If, however, the investor/lender regularly invests money for short periods of time, the recipient/borrower may renege on the agreement (Aruch Hashulchan, Y.D. 176:45). Obviously, if there is a common practice for these matters, that practice is binding.
Others differentiate depending on whether the terms are set per year, month or week (see Beis Ephraim, C.M. 17 cited by Pischei Teshuvah, Y.D.: 176:27 and Chelkas Binyamin, Hilchos Ribbis, p. 708).
Since it is common for the borrower/investor to pay early, it is essential to include guidelines for how the iska will be ended early and how much the recipient/borrower will have to pay, in order to avoid later disagreements.
Money mattersMultiple Guarantors#414
Q: What is the liability of each co-guarantor when there are multiple guarantors and the borrower defaults?
A: Halachah treats co-guarantors somewhat differently than civil law (Pischei Choshen, Halvaah 14:25, 27). Each co-guarantor is inherently liable for the full sum if the other co-guarantors are unable to contribute their share.
However, there is a dispute whether the lender can immediately collect the entire amount from one guarantor, who can then turn to the other co-guarantors for their contribution (“joint and several”), or he must first attempt to collect the proportionate share from each, and only if he is unable to may he collect the remainder from the others (similar to co-borrowers).
Some differentiate between co-guarantors who committed together at the time of the loan and co-guarantors who committed later with a kinyan (C.M. 77:3-4, 132:3-4; Sma 77:3,11; Ketzos 77:3). Nonetheless, if the lender stipulated that the liability is joint, certainly he can collect from any party immediately. Similarly, if the co-guarantors are arev kablan, the lender can collect from whomever he wants (Gra 77:18).