Substitution (istibdal) of waqf property under Iraqi law

In briefSubstitution takes an endowed asset out of the endowment and puts property or cash in its place. Article 6 of the Endowments Administration Law No. 64 of 1966 allows the endowment office and the trustee to substitute where it serves the endowment, by decision of the council with the approval of the office head, in whichever of property or cash is more beneficial. Cash consideration may be paid in instalments with a first-ranking mortgage on the property, and proceeds are spent on buying property for the endowment or building on it.

An endowed asset may be a neglected plot that yields nothing, or a crumbling building in a location that has become commercial. The endowment's interest may then lie in letting it go and taking something more useful in its place. That is substitution (istibdal), one of the most delicate endowment transactions, because it moves an asset from being held in perpetuity into ordinary ownership. The office of lawyer Ali Barakat, in Baghdad, al-Yarmouk, follows its rules for people applying for substitution and for those offered endowed property through this route.

The basis in the Endowments Administration Law

Article 6(1) of the Endowments Administration Law No. 64 of 1966 allows the endowment office and the trustee to substitute an endowed asset where substitution serves the endowment's interest, in property or in cash, whichever is more beneficial to the endowment. This is done by decision of the council with the approval of the head of the endowment body, without the need for a deed from the Sharia court. The essential condition is benefit, and the yardstick is what is better for the endowment, not what is easier for the other party.

Substitution in the office laws

The Sunni Endowment Office Law No. 56 of 2012 lists deciding in-kind substitution among the council's powers in article 7(IX). The Shia Endowment Office Law No. 57 of 2012 lists, in article 7(IX), selling an endowment and substituting another for it in accordance with Sharia and law. In both offices the decision belongs to the council, and each office law is read together with the 1966 law.

Paying cash consideration in instalments

Article 6(2) allows cash consideration to be accepted in instalments. The person taking the property pays part of the consideration and the rest in equal yearly instalments, no more than seven. The property is registered in that person's name but remains under a first-ranking mortgage for the outstanding instalments, which is noted on the land register. If one instalment is late, all remaining instalments fall due and are collected under the law on the collection of debts owed to the government. Article 6(3) has the endowment body collect rent for the property during the instalment period, reduced in proportion to the principal already paid.

Where the consideration goes

Article 9 of the Endowments Administration Law authorises the endowment body, by council decision, to spend expropriation and substitution proceeds on buying property for the endowment or putting up buildings on endowed land. Article 12 of the Sunni office law counts substitution proceeds among its resources. The consideration therefore does not go to general spending; it returns to the endowment as a new asset or as development.

Substitution on the land register

Article 258 of the Real Estate Registration Law No. 43 of 1971 bars any disposition over endowed property except those the law permits, and substitution is among them. The substitution decision, together with proof of payment or the mortgage annotation, is what the new registration rests on. See registering endowed property.

Substitution deeds in court

Where substitution proceeds by a deed before a court, article 309 of the Civil Procedure Law No. 83 of 1969 requires judgments in substitution deeds to be sent automatically to the Federal Court of Cassation, and they are not carried out before being upheld. A buyer under a substitution deed therefore waits for that confirmation before building.

Replacing a defunct charitable institution

Article 7(2) of the Endowments Administration Law covers a special case. If a charitable institution has stopped working entirely, or the purpose for which it was set up no longer exists, the council may replace it by setting up an equivalent institution where one is needed. If no such need exists, a similar institution is set up, and if that too is impossible, the asset stays in use for the endowment's income. For comparison of the two main offices see the Sunni Endowment Office and the Shia Endowment Office.

Legal basis and sources

Frequently asked questions

Does substitution require a court deed?

Article 6(1) of the Endowments Administration Law allows it by council decision with the approval of the head of the endowment body, without a Sharia deed.

Can the consideration be paid in instalments?

Yes, in equal yearly instalments of no more than seven, with the property under a first-ranking mortgage until payment, under article 6(2).

Is a substitution deed carried out as soon as it is issued?

No. It is sent automatically to the Federal Court of Cassation and not carried out before it is upheld, under article 309 of the Civil Procedure Law.

What is the test for accepting substitution?

That it serves the endowment's interest, with consideration in property or cash, whichever is more beneficial to the endowment.

Always check the text in force and its amendments in the official source.

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Substitution of endowed property and its consideration