Bava Metzia Chapter 5, Mishnah 2. The Mishnah continues to discuss cases in which the Sages imposed restrictions on things that appear like interest. It is worth emphasizing first what was stated in the previous mishnah: the issue of interest must be seen as a moral principle that the Torah wishes to instill regarding a fellow Jew - that it is obligatory to lend to him without interest. The loan is an act of lovingkindness with him, and collecting interest from him is almost akin to a hostile act.
The clearest expression of this in Halachah: with other monetary protections that the Torah established for the rights of others, the owner of the right may waive them if he wishes. There is a mitzvah not to steal, but if the owner says "take it for yourself" - it is permitted. There is a mitzvah to return a lost object, but if the owner says "keep it for yourself" - it is permitted. Regarding the prohibitions of interest, this is not the case: even if the borrower says "I do not mind paying interest", the Torah forbids it. The borrower and the lender are both partners in several Torah prohibitions in such a transaction, even though the protected party, the borrower, does not mind and wishes to waive his rights. He does not have the power to waive them.
For this reason, the laws of interest are studied in Yoreh Deah and not in Choshen Mishpat: they are laws between man and God no less than they are laws between man and his fellow. This is a law in which God seemingly reveals a personal interest in His children, our fellow Jews, and not merely civil law dictating that one must not wrong his friend.
"Lo yador bachatzeiro chinam" - He may not dwell in his courtyard for free:
From here onward, the Mishnah deals with matters that are not from the Torah but are Rabbinic. "Hamalveh es chaveiro lo yador bachatzeiro chinam" - one who lends to his friend may not dwell in his courtyard for free - it is forbidden for the lender to stay for free in the borrower's property, a guesthouse, or a rental apartment. This is not a Torah prohibition of fixed interest (ribbis ketzutzah), since this is not a transaction that was stipulated from the outset with the language: "I will lend you a hundred dollars in exchange for you not only returning the principal to me, but also giving me free lodging" - such a case is certainly forbidden by the Torah.
But even when the loan was given without conditions, and later the lender asks the borrower to stay in his home for a night, there is a problem of the appearance of interest: ultimately, the lender receives the principal of the loan, and in addition to it, free lodging in the rental property. This law applies even if the borrower does not rent out the place at all, and even if it is his private basement that is not up for rent. The rule is: any benefit that the borrower would not normally grant out of friendship alone, and would not have done so were it not for the loan - whether it is an expression of gratitude or stems from a sense of obligation due to an unpaid debt - is Rabbinically forbidden.
On the other hand, a person who regularly drives his friend to the synagogue every day, and later the friend lends him money, is not required to stop doing so out of fear of interest. But if he was not accustomed to hosting him for Shabbos, and once he lent to him he feels an obligation to host him - this is Rabbinic interest, the dust of interest (avak ribbis).
"Velo yiskor mimenu bepachos" - nor may he rent from him for less - the borrower may also not rent his guest unit to the lender at a lower price than usual. This too is a favor through which the lender receives a financial benefit and enjoyment beyond the return of the principal, and therefore it is avak ribbis. "Mipnei shehu ribbis" - because it is interest. Had this been established as a condition at the time of the loan, it would have been fixed interest from the Torah; since this is not the case, there is only the appearance of interest, which is forbidden Rabbinically. This concludes the first part of the mishnah.
"Marbin al hasachar ve'ein marbin al hamecher" - They may increase the rent but they may not increase the sale price:
The second part of the mishnah opens with a sort of topic sentence: it is permitted to increase the rental fee, and one may not increase the sale price. The Mishnah brings two examples of this.
What is the case in which it is permitted to increase the rental fee? "Hiskir lo es chatzeiro ve'amar lo: im me'achshav atah nosen li - harei hi lecha be'eser sela'im leshanah, ve'im shel chodesh bechodesh - besela lachodesh" - if one rented his courtyard to him and said to him: "If you pay me from now - it is yours for ten sela'im a year, and if on a month-by-month basis - for a sela a month." The landlord says to the prospective tenant: if you pay now in advance, the apartment is yours for ten sela'im a year (ten thousand dollars); and if you rent it from month to month, you will pay a sela a month - a thousand dollars a month, twelve thousand dollars in total. Seemingly there is a sort of interest here, and nevertheless the matter is completely permitted.
Why? The rule is that rental fees take effect and are due to the property owner at the end of the payment period, meaning at the end of the month and not at its beginning. It turns out that the market price, the fair price, is a sela a month - a thousand dollars, as it is at the end of every month. And when the landlord offers ten sela'im a year in exchange for payment in advance, he is not taking an addition, but rather granting a discount in exchange for receiving the money immediately. Because of this, it is not interest.
But you might ask: It is understandable that from the side of the landlord, the landowner, this is a discount; but what about the side of the renter? The renter gives ten at the beginning of the period and receives the benefit of twelve months of rent. It turns out that in exchange for parting with his money in advance, in exchange for waiting, he receives an addition. Why is this not an interest transaction, at least Rabbinically, like a commercial transaction? After all, we said that it is forbidden to say: "I will give you ten dollars now in exchange for twelve dollars' worth of wheat in the future."
The answer is that the entire transaction is executed at once, at its beginning. When the renter gives the ten selaim, he immediately acquires full rights for the entire year, and this is not done in stages. Proof of this: The apartment owner cannot retract and say in the middle of the period that he wants to take back the apartment and rent it to someone else. He has already handed it over for a full year. And since the entire transaction is done at once, there is no delayed return here and no deferred payment of any other sort: this is a simple transaction at its beginning - he gives ten selaim and receives rental rights for a year, right now. And since there are no future payments, there is no delayed return and no additional payment - there is no problem of interest here at all.
This rule applies to all types of rentals: a person who hires himself out as an hourly worker, or one who rents out his vehicle. In all these cases, he may say: By the day - a dollar a day; but if you take it for a whole month and pay in advance - twenty-five for the whole month. It is the exact same concept, and it is all permitted.
"Ve'ein marbin al hamecher":
"Mocheir sadehu ve'amar lo, im mei'achshav atah nosein li - harei hi shelcha be'elef zuz, ve'im lagoren - bishneim asar maneh" - the owner says to the buyer: If you pay me immediately, the field is yours for one thousand zuz; and if you wait until the harvesting season, when the field will yield its produce and you will have cash from its sale, you will pay me one thousand two hundred zuz. This is forbidden.
Why is it forbidden? Rabbinically, because this is classic financing, commercial financing. The meaning of this is: The item is worth one thousand zuz, and at this price I would sell it now; but if you want me to finance the purchase for you and you pay late - you will pay more. It turns out that the seller receives payment for waiting, compensation for the delayed receipt of the money. And this is the essence of interest: I give one thousand now and wait to receive my money back, and therefore I demand one thousand two hundred at the time of repayment. Here too: I hand over now something that is worth one thousand, the field, and at the time of the future payment the buyer pays one thousand two hundred.
So it is with any purchase in installments, trade financing, and the like, in which a higher payment is received in exchange for waiting for payment. This is the central point, and the matter is forbidden at least Rabbinically, as avak ribbis. This is only Rabbinic because the transaction is structured as a commercial transaction and not as a loan; but in its essence it is very similar, and it can easily be broken down into two separate transactions to reveal that we have a full-fledged loan before us.
How so? Let us assume that Shimon wishes to buy Reuven's field, and Reuven says: One thousand now, or one thousand two hundred later. Shimon says: I do not have one thousand now, so I will go to the bank and ask them to lend me one thousand, and I will repay them one thousand two hundred when I have the money. Then Shimon gives one thousand to the owner, and the purchase is thus made for one thousand, except that it was financed by the bank - and vis-a-vis the bank this is Torah-prohibited interest, since he commits to paying more in the future. In the case before us, this is only a Rabbinic prohibition, because the transaction is not defined as a loan; but economically it is exactly the same thing, and for this reason the Sages forbade it.
In summary: In this Mishnah we learned the Rabbinic expansions of the prohibition of interest: The lender may not live in the borrower's courtyard for free, nor may he rent from him for less than the going rate, and any benefit that would not have been given were it not for the loan is avak ribbis. We also discussed the rule, "Marbin al hasachar ve'ein marbin al hamecher" - we may increase on rent but we may not increase on a sale: In a rental, where the obligation to pay takes effect at its end and the transaction is finalized all at once, reducing the price in exchange for advance payment is a permitted discount; whereas in a sale, raising the price in exchange for delaying the payment is financing and payment for waiting, and is Rabbinically forbidden as avak ribbis.