5 Downsides to Domain Name Leasing | DomainInvesting.com

5 Downsides to Domain Name Leasing

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Although it’s not a new idea, it seems that more people are touting the benefits of leasing a domain name than ever before. I have leased domain names before, and despite the fact that I have no qualms about leasing domain names under certain terms, I do think there are a number of downsides that need to be considered.

I want to share some of the negative aspects of domain name leasing from the perspective of a domain owner:

Can’t sell the domain name – During the lease term, it’s unlikely that your leasee will allow you to sell the domain name. Should you be leasing a domain name for $500 a month and receive a third party unsolicited six figure offer, you may be out of luck unless the buyer is willing to wait.

Leasee may bail – It’s very possible that a leasee could decide to stop paying you for the lease during the term, and you’ll be back at square one. There may be penalties for not paying, but going the legal route to force payment could be costly and time consuming.

Expensive to hold in escrow – Companies who lease a domain name from you will likely want to keep the domain name in an escrow account for their protection. This service may be somewhat expensive, especially if your lease is for less than $1k. In addition, the costs are likely to be upfront.

Costly legal fees – I strongly urge you to have an attorney with domain name and IP experience draw up a contract for you to use to protect you and the other party. This upfront cost can be expensive, but it is critical.

“Damage” to your domain name – Although you will most likely have a clause in your lease agreement with prohibitions on what can be displayed on the domain name, if the leasee uses it in a way that will harm its value (spam, illegal activity, search engine submission or marketing issues…etc), your domain name could lose value. Yes, you would have recourse to take the name back, but the damage could be done and it could take a while to rectify.


About The Author: Elliot Silver is an Internet entrepreneur and publisher of DomainInvesting.com. Elliot is also the founder and President of Top Notch Domains, LLC, a company that has sold seven figures worth of domain names in the last five years. Please read the DomainInvesting.com Terms of Use page for additional information about the publisher, website comment policy, disclosures, and conflicts of interest.


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Comments (47)

    Ryan

    Sorry, lease to own is only model that will work. Significant value gets put into building a brand, I feel a domain is brand in itself. Rick Schwartzkoff or whatever his name is, needs your names to draw attention to his names. Twitter, Instagram, Microsoft, google were not generic keywords, or domains they have created succes regardless.

    Might work for a few promo names, longrun, it’s a suckers bet.

    February 4th, 2013 at 12:02 pm

      Elliot Silver

      There’s a huge difference between leasing and a joint venture.

      February 4th, 2013 at 12:06 pm

      MarkH

      Ryan Seacrest or whatever your name is.

      Your Rick needing my names to draw attention to his names comment is making me laugh. Thanks for that…

      February 4th, 2013 at 5:31 pm

      Ryan

      Don’t hate because we kicked your saggy self off American idol, the look is tired time for a haircut…

      Yes, lemmings love to follow… That is why you are here defending something that is unknown, job well done.

      I saw the list most are good names which have been shopped around for years, if anyone chooses to lease, or head to the new gtld to rebrand is anyone guess.

      February 4th, 2013 at 6:35 pm

      MarkH

      LOL. I don’t think I am hating.

      And I almost cut my hair, it happened just the other day, it’s getting kind of long. Maybe I will write a song about it.

      I see it differently, I listened to and watched what Rick was doing 13 years ago and it has paid off. I wish I had been more like a “lemming” and done more of what he was doing. He has also turned some of his assets into much more than many might have, his candy.com deal was pretty “sweet”. So if Rick has another “great ‘unknown’ idea” I am in.

      February 4th, 2013 at 8:20 pm

    Rick Schwartz

    “Can’t sell the domain name”

    Elliot, Not true. There is a clause in every lease I have ever done that addresses that. The current lessee has first right of refusal and they have a specified period of time to do that in. Usually a few days.

    “Leasee may bail”

    Yep, they can stop paying their lease. That’s life. That’s why it has to be a win-win situation so it becomes long term vs short term and they WANT topay their lease.

    “Expensive to hold in escrow”

    There is no escrow when you lease. The domain owner retains full control at all times.

    “Costly legal fees”

    We already have lease agreements in place. Most will pass it by ther attorney but there is really nothing to object to.

    “Damage” to your domain name”

    There is language in our contracts that address that.

    February 4th, 2013 at 12:06 pm

    Rick Schwartz

    There’s a huge difference between leasing and a joint venture.

    Elliot,
    At JointVentures.com we do both, plus. Some only want to lease and have a defined period. Others want lease with an option to buy. Yet others are interested in 50/50 partnerships. So we do all 3.

    February 4th, 2013 at 12:09 pm

      Elliot Silver

      Good to know.

      When I think of a jv I think more in terms of what I know about the Candy.com deal.

      February 4th, 2013 at 12:10 pm

    Rick Schwartz

    Elliot,
    Many of the Joint Ventures will start with a straight lease. That gives the parties a chance to get to know each other and then it becomes easier to hammer out a final deal.

    February 4th, 2013 at 12:21 pm

    Francois

    Your section about escrow be expensive is not accurate for eCOP.com:

    We secures leasing for 2% only and the money is not taken upfront but at each payment!
    So cheap and no risk.

    If you are charging for example $500 per month then the escrow fee is $10 monthly.

    February 4th, 2013 at 12:56 pm

    DonnyM

    I look at it as 5 upsides to domain leasing.

    It’s just like owning a house and renting it out. You take the chance that the owners may run a meth house out it. Are you covered under your home policy for that? Probably not but some do cover it.

    Always a risk with leasing anything. Auto, house, boat, equipment etc.
    Domain names will be no different.

    Starbucks, McDonalds do not have the best coffee in the world, but they do have the best “lease locations”. That is why they make it.

    DonnyM

    February 4th, 2013 at 1:06 pm

      Ron

      I see it like buying a past Meth house, and fixing it up, and then the owner wants to up the rent on you, then land comes into rezoning, and owner wants to cash in, and kick you out.

      I am a domainer, I get the side of it, but I am trying to think from the end users perspective.

      February 4th, 2013 at 1:38 pm

      DonnyM

      Ron
      You’re still thinking like a domainer.

      I just saw some well know blogger sell loan name for 4k. He could of picked up the phone and got 250 a month or even 500 month at the very least with a lease option. But hey keep flipping for a thousand bucks…

      February 4th, 2013 at 6:58 pm

      Ron

      Your domains are not the only options out there, as long as there are sellers with comparable domains, the likely hood of good domains getting a monthly rental income, while the renter is expected to develop the property seems like not a very good deal for the renter.

      It could work with a few deals, but if you follow techcrunch you will see how new startups are choosing to brand, and spend their money.

      February 4th, 2013 at 7:14 pm

    Ron

    Best advice you are going to get, takes $2k, and update the joint ventures website, it looks like an ebay ad, with all the green highlighted text, and random font sizes, and blurry graphics. I think it is the best single thing you can do for your business.

    February 4th, 2013 at 1:31 pm

    ron s

    I agree. The site looks cheesy. shitcan the glowing text and mute it all down. Put some class into the overall look. Who made this site, Rick?

    February 4th, 2013 at 2:20 pm

    Talk like this

    There has always been a risk in business …
    People who bought a pile of apple stock and now it might be the roof is on fire..
    So, is everything.. no risk no gain but we should find the fine line..
    There are many domain broker that will help to find the right terms and conditions for both parties …

    But some of the things you stated is to be
    Consider ..

    February 4th, 2013 at 2:24 pm

    Rick Schwartz

    The cubicle whores are starting to come out.
    Sorry you feel so threatened guys.

    February 4th, 2013 at 2:43 pm

    AHEAD OF TIME

    Rick & Danny have secret weapons coming that’s going to blow competition out of the water. Time and facts will show why these
    are the people to listen to.

    They have some amazing domains added to the leasing list!! Why because people trust them and they have success running through their blood. One thing Rick has taught me is PATIENCE and in the domaining world it is one of the keys to success.

    February 4th, 2013 at 4:47 pm

    Jeff Schneider

    Hi Elliott,

    RE: ” The cubicle whores are starting to come out.
    Sorry you feel so threatened guys.

    Good point Rick !

    So I know Rick is hesitant to name Cubical Whores but I can think of a big list of domainers that this could entail.
    Many are hoping Rick fails so as to protect their Turf. You are starting to hear the howling already, I see.

    My advice don’t bet against Rick Schwartz. If you are smart you will study his JointVentures.com blueprint for the future.

    Gratefully, Jeff Schneider (Contact Group) (Metal Tiger)

    February 4th, 2013 at 5:15 pm

      Ron

      Seriously man wtf do you talk about half the time? You just repeat everything… do you have an opinion outside of R.S.?

      He doesn’t care about you, why don’t you think for yourself, and for yourself.

      February 4th, 2013 at 6:24 pm

    MarkH

    I am all in at JV. I have 6 names that are being offered for lease, they are parked at DNS with the inquiry link going to JV. I have also delisted the domains everywhere else and put privacy on them(first time ever). So basically they are Rick’s names to work his mojo on. Any and all interest in the names will have to go through JV.

    I would love nothing more than to have Rick Schwartz(koff) negotiate a deal on my domains just like he does on his own. And in the meantime I make all the parking income. My money is still on Rick just as it has been in the past and I am still banking from betting on Rick in the past. And, I am betting the future will be even brighter…

    February 4th, 2013 at 5:55 pm

    Jeff Schneider

    @ Ron

    I see theres lots you don’t know?

    He is hegotiating for me and 119 others.

    Gratefully, Jeff Schneider (Contact Group) (Metal Tiger)

    February 4th, 2013 at 6:44 pm

      Ron

      Whatever you say crouching tiger.

      February 4th, 2013 at 6:48 pm

    Scott Neuman

    Ricks plan works. I’m looking forward to positive results.

    February 4th, 2013 at 10:57 pm

    Jack

    A lot of people on here are very excited about leasing their names – but they don’t realize it’s just not going to happen. There are definitely some awesome names on this list – BUT there is plenty of pigeon shit as well.

    And if you think the average end user is averse to buying a domain name, wait until you see their reaction to paying a few thousand bucks per month just to have a name they may or may not own in 3 or 4 years. Oh yeah, and it may involve a revenue share.

    So I look forward to hearing the details of the first few deals. There will be a few, and hey maybe a pharma company will lease relievearthritis.com for a campaign – that would make a lot of sense for the agency who doesn’t want the client to pay $100k up front.

    But for most of you, this project will be another widgets.com

    February 5th, 2013 at 12:53 am

    Jeff Schneider

    @ Ron,

    No offense Ron but you need to get with the real innovators of future Web development. TechCrunch is not what I would label a trend setting Think tank. To constrained by old World Dogmas and followers not leaders. I know this will probably set the dogs after me , but seriuosly you need to find a new dog to pull your sled if you truly want to make it.

    By the way if you would like to know my thought leadership publishings you might want to check out some of them I am well documented.

    DOGGING. me will only make you look silly my friend.

    Gratefully, Jeff Schneider (Contact Group) (Metal Tiger)

    February 5th, 2013 at 12:55 am

      Ron

      Personally, I think your a bit wacky, I don’t follow anyone person, or expect them to pave the way for me. I listen, and judge the facts for myself. You can keep sniffing where you want, but seriously half the time you are talking out of your a&&.

      Don’t let your reputation supersede you registering domains like FinanceApprovals.com, Dharmaebiz.com…

      Then you go register askebiz.com, and let it drop, and look who goes and picks it up, and builds a site on it, how much did you make $0

      Not dogging you, but telling you to start thinking for yourself. Compliments are great, but you take it way to far.

      All the best

      February 5th, 2013 at 1:12 am

    jimmy

    i think it’s funny that jointventures.com thinks people will want to go into business with them when their website looks so awful. it would be different if they were selling tacos, but they’re selling online real estate and they have a website that looks like it was designed for netscape.

    February 5th, 2013 at 1:52 am

    jayjay

    @jimmy when you have Klout like RS then even the most basic of web 1.0 static html pages offering erealestate in one form or another will draw in viable leads.

    As they say “never judge a book by it’s cover only it’s content!” 😉

    February 5th, 2013 at 5:55 am

    Stu Holly

    Sounds like a few people on here have had their domains rejected by Rick and have come for a moan !

    February 5th, 2013 at 7:39 am

    Lda

    > …it would be different if they were
    > selling tacos, but they’re selling
    > online real estate and they have a
    > website that looks like it was designed
    > for netscape.

    My first impression of JointVentures.com,
    (which hasn’t changed to date), is that it
    was designed to to be a CLICKBANK ‘Pitch
    Page’.

    CLICKBANK pages work with an IQ-restricted
    demographic, but I cannot imagine that an
    end-user company director, looking for a
    high quality ‘Flagship’ domain for their
    enterprise, would find much comforting
    assurance in JointVentures.com’s
    projectile-verbiage format.

    February 5th, 2013 at 9:03 am

    John V

    Leasing a domain makes no sense for a large or small company.. Why would a company pay money to lease a parked domain? They would be throwing money down the drain…

    And it also makes no sense for a company to develop the domain since they don’t even own the domain outright..Full scale development should only be undertaken if the domain is owned , not leased.. The whole leasing model is seriously flawed..

    February 5th, 2013 at 10:15 am

    wiposucks

    @John V, you are totally correct. There is no way a successful company pay thousands of dollars per month to lease a domain that they will not own, furthermore in Rick’s response to Elliot he states that the owner maintains control of the domain, that makes the domain being leased less valuable.

    February 5th, 2013 at 10:58 am

    Talk like this

    What ever might happen with domain leasing … Someone has to do it… To see if its safe … If it will work … and find the facts ..
    In order to get the fact check it takes a strong man with heart , soul and mind and it can’t be other then Rick … Yes, you read it right …
    He might fail he might pass but he is The only one guy who got a balls to try it .. And of course if jv is success then there will be lot of other who will like to have a slice of pie but if it turnout negative then there will be thousands of finger pointing at him …
    It remained me a post from 2004 Read the post and wondere why we need the elephants 😉
    “The elephants that tested the Brooklyn Bridge”
    http://ephemeralnewyork.wordpress.com/2011/12/22/the-elephants-that-tested-the-new-brooklyn-bridge/

    February 5th, 2013 at 11:03 am

    Jamie

    I like turtles. :)

    February 5th, 2013 at 1:29 pm

    Puckerhuddle

    Many analogies have been drawn showing the similarities between physical real estate and domain names.
    Here is another one.
    Rarely will you find a top real estate agent who is also tops in the real estate leasing end of the business.
    These are two different mind sets and the person who sell real estate will not be able to understand why people and businesses lease when they could own. Yet both are large and viable business models.

    February 5th, 2013 at 2:56 pm

    DM.

    The traffic and additional business will absorb any concerns about ownership and development. The bottom line will speak. I’m not a huge fan of the JV website but what do I know. Good luck to them, I’ll be watching.

    February 5th, 2013 at 5:14 pm

    MarkH

    Regardless of the downsides to leasing vs. owning many businesses lease – property, equipment, vehicles, etc. They do not buy the mall or mainstreet to have a shop there, they lease, it is a very common business practice. And many times even if the business does want to own some property or equipment they will do a lease purchase option – or some form of financing or payment plan.

    Some domain investors already make money leasing email addresses…

    February 5th, 2013 at 10:21 pm

    Jack

    Mark,

    I’m guessing you haven’t developed many websites. And either has Rick. When you develop a site you understand how much work it is, and you understand that the last thing in the world you want is uncertainty over the long term location of your site.

    February 6th, 2013 at 12:08 am

      MarkH

      Hello Jack,

      Good points, duly noted. I was just pointing out that leasing is a common business practice. I lease the space where my business is located. Over 10 years I have invested multiple thousands to customize the space also – even though I will never own it. I signed a long term lease so I do not mind investing in the space and I know in the long run the property owner will probably benefit the most from my improvements.

      And I have developed some successful websites actually – and yes it takes a tremendous amount of work, commitment and dedication.

      February 7th, 2013 at 10:56 am

    Jeff Schneider

    @ Ron,

    R. E. = ” ,Then you go register askebiz.com, and let it drop, and look who goes and picks it up, and builds a site on it, how much did you make $0

    Not dogging you, but telling you to start thinking for yourself. Compliments are great, but you take it way to far.”

    Ron I am so abundant in .COMs, that I many times let good names go to share in the wealth, you may not get this but Giving is recieving.

    Gratefully, Jeff Schneider (Contact Group) (Metal Tiger)

    April 15th, 2013 at 3:13 pm

    Bobby Cakes

    Candy .com

    comes to mind….

    cough cough!

    domainnamewire com /2013/03/25/

    August 6th, 2013 at 7:54 pm

    Bill

    From the comments here, I dare say none of you are accountants. One consideration in leasing versus buying. Lease payments are currently deductible business expenses, while a purchased domain for business purposes must be capitalized and amortized as an intangible asset, which is 15 years. Domain valuation and income statement handling is sort of new turf for the I.R.S. And, as http://www.taxplanninginvestments.com explains, there are special rules and restrictions for Sub S Corporation distributions to shareholders.

    November 12th, 2013 at 9:17 pm

    Ahmad Al-Kassar

    The Market segment for Leasing Domain names is getting bigger every day, I agree with the Mr. Silver that it might take a while before you can regain the reputation of the Domain if misused by the Lessee, however there are Contract closes will protect you and makes the lessee pays for his faults, and again can you tell me one business without RISK, at dotcity.city we are adapting the following business module, we charge the Leasing value monthly at the end of the actually passed month, we are more confident that if the Lessee leaves more will come in no time, and that is because our Domain names are VVIP, we own unique domain names in the format, “cityname.city” and high chances are that your cityname.city is already owned by DOTCITY LP, that is why we believe from the Owner point of view it is worth it to Lease out your unique cityname.city domain cause the matching city names are limited to the number of cities in the world which might be around 5000 only.
    about other domains extensions? True you might be 100% Correct cause we do not do any transaction with other Extensions, we specialize in cityname.city only

    July 28th, 2015 at 5:11 pm

    JC

    I own BEACHCRUISER.COM, I am interested in leasing it out or selling it.

    Thanks.

    June 13th, 2016 at 12:11 am

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