Yehuda wished to rent a house in the neighborhood. He saw two houses advertised: a four-bedroom for $4,000 a month and a five-bedroom for $4,500.

Yehuda and his wife went to see both houses. His wife was extremely impressed with the layout of the second house. “This serves our needs almost perfectly,” she said.

“But it’s expensive,” replied Yehuda. “We decided that our budget won’t allow more than $4,000 a month.”

“Let’s try negotiating with them,” said his wife.

“We’re very interested in renting the house,” Yehuda said to the landlord, Aryeh. “However, the $4,500 you’re asking is beyond what we’re able to pay. We’re looking at another house three blocks a way for $4,000. If you can’t match that, we’ll have to rent there.”

Aryeh thought for a moment. “I’ll make you a deal,” he said. “If you pay monthly, it’s $4,500; if you pay six months up front, I’ll give it to you for $4,000.”

“We would be willing to do that,” Aryeh replied. “I don’t know, though, whether we’re allowed to! I’m concerned that there may be a prohibition of ribbis (charging interest).”

“What do you mean?” asked Aryeh. “Who’s borrowing anything here?”

“Think about it,” said Yehuda. “You want $4,500 monthly, but if we pay six months ahead, you’re willing to accept a lower rent. It’s like you’re giving us a discount because we’re laying out money to you, like granting you a loan!”

“I hadn’t thought of that,” said Aryeh. “Why don’t we check with Rabbi Dayan to see if that’s a problem?”

Yehuda and Aryeh met with Rabbi Dayan and explained the situation.

“A prepayment discount or, conversely, a two-tier price surcharge for purchase of merchandise is often considered ribbis,” replied Rabbi Dayan. “However, the Mishnah (B.M. 65a) teaches that a prepayment discount for rentals is permissible” (Y.D. 176:6).

“Why is there a difference between a purchase and a rental?” asked Yehuda.

“One explanation is that the monetary obligation of a customer is only at the consummation of the sale,” explained Rabbi Dayan. “Therefore, any advance payment is considered a loan to the seller; any delay of payment is a loan to the customer. Hence, there is potential ribbis. However, a renter has an ongoing monetary commitment from the beginning of the rental, even if the payment is due only month by month. Therefore, the prepayment is not viewed as a loan to the landlord, but as payment of the existing rental obligation” (see Bris Yehudah 26:1 ftnt. 1; Shach, C.M. 126:76 ).

“Another lomdishe (analytical) explanation,” continued Rabbi Dayan, “is that there are two different models of renting. When paying monthly, the rental payment is for the actual usage and due only at that time. However, paying up front is like ‘acquiring’ the usage rights of the entire rental period at the time of payment. Thus, there is no ‘prepayment’ and no loan — since the legal transaction of the rental rights is occurring now” (Kovetz He’aros, Yevamos #502; Kehillos Yaakov, B.M. #46).

“What if the rental discount requires payment before moving in?” asked Yehuda. “For example, the landlord may demand that payment be made a month before the rental lease begins. The rationales you mentioned might not apply in this case.”

“There is a dispute on this issue, but many authorities allow the prepayment discount even before the renter moves in,” answered Rabbi Dayan. “However, there must already be a binding commitment to the rental, either through a signed lease, kinyan sudar, etc. Some also suggest that the rental must be fit for renting at the time of the prepayment” (Taz and Nekudos Hakesef 176:7; The Laws of Ribbis 11:14-22; Bris Yehudah 26:1 ftnt. 2).