Salaam,
I recently came across the investing method called Tax Lien
Certificates here in the US. This is a concept where counties sell
delinquent property taxes to investors in order to get the value of the
back taxes to pay for county services (such as paying for police, teachers, etc). When the property owner pays
their back taxes (with penalties), the investor gets their money plus
interest that was agree upon at the time the tax lien certificate was purchased. If the owner does not pay their taxes by a certain date (as
defined by the county), the investor gets ownership of the property for
the amount they invested.
For example, homeowner A owes $900 in property taxes for 2007, due on 1/1/08. As of 6/1/08 the county auctions this $900 into a tax certificate that investor B purchases at an interest rate of 16%. A has until 1/1/10 to pay the$900 plus penalties that continue to accrue until payment is made. If A makes payment of $900+penalties, B is paid $900+16% interest by county. If A doesn't make payment by 1/1/10, B becomes legal owner of property.
My question is, does this type of investing
seem halaal?
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