The compensation (badal) that is paid by a landlord to a tenant against having the leased property vacated from the lessee (tenant). The landlord could agree to pay a specific lump-sum amount over and above the monthly rent (ujrah). In case the landlord manages get back the property prematurely i.e., before the expiration date of the lease, he would be bound to return part of the lump sum. Similarly, the above agreement could involve a property which is already leased but the agreement for badal al-khulu is entered into during the period of the current lease. As long as the lease period has not expired, the agreement is considered valid (sahih) from a shari’a perspective. It is not shari’a compliant to enter into such an agreement because the lease period is already over and the landlord or the lessee are no more parties to an effective lease contract.

However, shari’a permits that the lessor and lessee agree that the latter can sublease the property to a third party and the new lessee agrees to pay some compensation to the landlord and the original lessee.

Badal al-khulu could also be applied to a variety of assets including machinery, plants, and so on.

It is Arabic (بدل الخلو) for key money.