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information Lease-To-Own Domain Name Payment Plans

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A lot has happened since I last covered Domain Name Payment Plans in the NamePros Blog in 2019. Partly because of the terminology used by Dan, one of the major marketplaces offering payment plans for a number of years, such plans are usually now called Lease-To-Own (LTO), a more precise term.

More marketplaces now offer LTO as an option, and as of last week’s announcement, that will include Afternic.

While it is hard to get firm statistics, it seems that the fraction of names offered with a LTO option has increased over the years. Once Afternic LTO is active, that will undoubtedly increase.

Businesses are accustomed to leasing many things, and it makes sense to be able to do that with a digital asset, to spread payments over a time interval when they expect higher revenue.

Information on the Afternic Sale Lander Settings page indicates, presumably based on in-house research,
On average, sellers who offer payment plans generate 30% to 200% more sales.

The Basic Idea

I think most are now familiar with domain name lease-to-own (LTO) plans, but here is an outline.
  • When a name is sold under a LTO, the domain name is usually placed under control of the marketplace, or some other third party.
  • The domain name buyer pays the first monthly installment, and then the buyer has use, but not ownership, of the domain name. They could, for example, have it forwarded to an existing website, or DNS settings to support a new website on the name.
  • The legal agreement prohibits use in ways that would harm the value of the domain name – we will have more on that later.
  • After the final payment is complete, domain name ownership is transferred to the buyer, and the transaction is complete.
  • In the event of non-payment, the domain name reverts to the seller. Normally the payments that have already been made, minus commissions and possibly fees, are retained by the seller.
Check the terms of service if you are considering offering domain names on LTO, in particular how your domain names are protected from harm, and the details on fees and procedures.

Once a buyer has started a LTO, as long as the buyer keeps making payments, and follows restrictions outlined in the contract, the seller can’t change their mind about selling. Therefore, one attractive feature of a LTO, from the buyer perspective, is that they can lock-in rights to a name without a major up-front payment.

The buyer has the freedom to walk away from the purchase, with no obligation to continue payments, and with no loss other than the amount they have already paid. This is attractive to some buyers who may not be sure about a project, but want to secure their preferred name. I could not obtain statistics, but anecdotally it seems that quite a few LTO plans result in premature termination of payments.

Domain Name Rental Is Different

Some domain marketplaces and services, such as Dan, also offer domain name rental options. It is important to be clear that lease-to-own and rental are different.

On a rental plan, the payments made are simply to rent use of the domain name for some period of time. The business renting the name has no claim on ownership of the name, no matter how long they pay rent.

Dan LTO

This is how the Dan lease-to-own works.
  • To use installments, first from the Settings section of your account, on the For Sale page subsection, scroll down to Payment Plan Options and select Enable Installments.
  • From that, you set the maximum possible LTO period. Your choices are up to 12 months, 13-24 months, 25-36 months, 37-60 months, or a custom setting. The longer the period the more your commission settings will be reduced, but also there is a higher markup on the list price for the buyer. See more on this below.
  • Your domain name must have a buy-now price set, with a minimum price of $495.
  • You activate LTO on an individual domain name from the Pricing tab. After turning on LTO for that name, you can select the number of payments, but each needs to be at least $99. For example, if you have a $495 buy-now price, you are allowed up to 5 payments, each at $99. Because of financing charges added, higher priced domain names have longer maximum periods, for example a $4000 name can be as many as 52 months, with the buyer paying $100 per month.
  • Dan also offers rental options, and you can activate, from the Pricing tab, both rental and lease options on the same name.
  • As long as no purchase has been made, you are allowed to change the LTO period on individual names at any time.
  • When you have a LTO sale active, Dan automatically handle the collection of the funds each month, and make a payment of the net amount after commission.
  • The buyer can stop the plan, in which case the domain name will be returned to your account and control. You keep the funds already paid. The buyer can also, at Dan, make payments early, and take ownership prior to the full LTO period.
Afternic LTO

Since GoDaddy own both Afternic and Dan, the newly announced Afternic LTO program is similar to Dan. Dan recently made changes in their compensation to sellers for long-term leases to make the two consistent, see the next section.

@James Iles laid out the main aspects of Afternic LTO in the Afternic Blog article Afternic is Launching Lease to Own - 4 Things Sellers Can Do Today. It was also published here at NamePros on the official GoDaddy discussion thread. Here are some key points based on that article, and the discussion on the topic here and on social media.
  • It is important to realize that Afternic has made it now possible for sellers to set up their domains allowing LTO, but that the Afternic LTO program for domain buyers is not yet active. When will that happen? The release says “soon”, and by press time I was not able to get a firm date.
  • At least at launch, the Afternic LTO will cover domain names with BIN prices between $495 and $100,000. In response to investor comments, @Paul Nicks replied on social media that this is step one, and the high-end cutoff might increase at a later date.
  • The Afternic LTO duration can be up to 60 months, depending on the domain price. The monthly payment must be at least $100.
  • For existing Afternic domain name listings, you will need to enable LTO from the Afternic portfolio area. When you activate LTO for a domain name, it will be set to the maximum possible, but you can adjust to a shorter length.
  • You can save time by selecting multiple names using the left-hand tick boxes, and then enable LTO on the set.
  • For names added in the future to Afternic, you can make the default setting to have LTO activated. Go to the Afternic account settings, then under Lease To Own activate Enable Installments. You can also set your default lander at the same place.
  • Note that having your Dan listed names appear at Afternic, the default after Aug. 1, 2023, does not mean that those names will have the LTO option enabled at Afternic, even if you have LTO activated on the original Dan listing. This means if you want to use Afternic LTO you should directly list the names at Afternic.
  • There is a small point that I almost overlooked. Apparently you must not choose Dan lander at Afternic if you simultaneously have the name listed at Dan.
  • At a later date, LTO enabled Afternic names will have the LTO option at GoDaddy registrar listings. At least for now, it will not be throughout the fast transfer network.
  • Various people have asked about domain names that do not sell at the BIN price. The official Afternic account on Twitter has responded that their brokers will be able to activate LTO on negotiated price sales.
Price Markup and Commission Reduction

Both Dan and Afternic will have an identical structure that offers a seller commission discount depending on the length of the LTO.

2-12 months​
13-24 months​
25-36 months​
37-60 months​
0%​
5%​
10%​
15%​

If the length is 12 months or less there is no markup to buyer from the list price, and no reduction of commission paid by the seller.

For example, let’s say you sell a $3000 name at Afternic on a 30 month LTO. The seller commission is reduced by 10%. This means that if the lander was pointed to Afternic or Dan, setting 15% commission, your net commission would now just be 5%. If you were not using Afternic or Dan DNS settings, so the standard commission is 25%, it would be reduced by to 15%.

So how can Afternic and Dan offer this commission reduction? It is because the price paid by the buyer is increased from the list price. Through 12 months, there is no markup, and the buyer pays the same total as they would for an instant purchase. From 13 through 24 months the markup is 10%, from 25 through 36 months 20%, and from 37 to 60 months the markup would be 30%.

For example, for the $3000 example on a 30 month LTO sale, if your DNS had pointed at Dan or Afternic, your net commission would only be 5%, or $150. However, the buyer of the domain name would pay a 20% markup, $3600 instead of the $3000 list.

SquadHelp LTO

SquadHelp allow you to set lease-to-own on both standard and premium listings, with the maximum period 24 months. The seller can select the maximum number of installments for individual names, including none offered. Buyers can choose shorter periods at checkout, and are not required to use the maximum length. As with Dan, the seller can alter the number of installments at any time, as long as a purchase plan is not operational.

Escrow.COM

For high-priced names, Escrow.com offers the lowest overall cost for a LTO. At Escrow.com it is called Secure domain name holding, and the link provides details.

There is the standard Escrow fee plus a holding fee. If Escrow.com are managing the DNS, the holding fee is $40/month, while the fee is $25/month if the DNS setup and changes are managed by the seller. Normally the transaction is set up so that the buyer pays the fees, or sometimes buyer and seller share fees.

BrandBucket

BrandBucket allows payments up to 12 months in length. When prospective buyers are using the BrandBucket search engine they can set it to only show names with LTO availability.

BrandPa

At BrandPa you can set whether payments are available on individual names. The maximum period is 12 months. The cost to buyer is essentially the same, whether the domain name is bought instantly or on a payment plan.

Biix

Payment options are available at Biix, I presume administered through Escrow.com that they use to close sales. The option shows up on the lander. There are at least options to 36 months duration. With a pull-down, their lander shows the price per day, interesting information for the prospective buyer.

Big Sellers

Many of the big sellers offer LTO payment plans. This is important to keep in mind, since buyers for our domain names may well be considering name options at these sellers.

HugeDomains offer 3, 6 or 12 month plans on most domain names, all without interest charges.

DomainMarket offers payment plans up to 24 months on many names, with the plan administered by Escrow.com and the buyer paying the service fee. They offer a discount over listed price for paying full cost up front.

Dynadot

Several registrars offer LTO programs for names registered at that registrar and sold on their marketplace. The Dynadot program allows up to 12 months, but only for a period as long as the name has remaining on registration, minus one month.

NameSilo

NameSilo has offered payment plans for some time, with a maximum duration of 12 months. If you use the NameSilo landers, they clearly show both BIN and LTO options to prospective buyers.

Other Options

See my earlier article for other options, including using a domain attorney to set up an individual agreement for a LTO.

Protection of Names on LTO

I think the main concern about LTO has been possible harm to the domain name, that would decrease future worth if the plan terminates and the name is to be resold.

Here is the relevant section of the Dan Terms of Service covering lease and rental plans. It starts with the following general statement:
In the event of purchase of a domain name by way of Rental Agreement and/or Lease to Own Agreement, the Transferee shall only use the domain name in accordance with any applicable law and regulation, and with all duty and care.
It then itemizes a number of specifically restricted uses:
For the avoidance of doubt, the Transferee is banned from using the domain name in case such use:
  • is in breach of any applicable law, statute, or regulation;
  • is fraudulent, criminal or unlawful;
  • promotes racism, bigotry, hatred or physical harm of any kind against any group or individual;
  • infringes or breaches the patent, copyright, trademark, trade secret, right of publicity or other intellectual property) rights of any Third Party;
    contains video, audio photographs, or images of another person without his or her permission (or in the case of a minor, the minor's legal guardian’s permission);
  • provides information on any illegal activity (including, but not limited to, instructional information on acquiring or fabricating illegal weapons or drugs, privacy violations or distributing computer viruses);
  • publicizes or promotes commercial activities an/or sales without our prior written consent such as contests, sweepstakes, barter, advertising, and pyramid schemes; or
  • involves the use, delivery or transmission of any viruses, harmful code, unsolicited emails, Trojan horses or any other computer programming routines that are intended to disrupt, damage, detrimentally interfere with, surreptitiously intercept or expropriate any system, data or personal information.
It then adds
Notwithstanding the above, Client acknowledges and agrees that any (other) prohibited activity as referred to in Clause 5 above, as well or any other activity which may cause damages to the Provider or another person or Third Party and/or which may decrease the value of the domain name are strictly prohibited. Such activities include (but are not limited to) the use of aggressive SEO strategies, techniques and tactics that focus only on search engines and not a human audience, and usually does not obey search engines guidelines (black hat SEO), such as keyword stuffing, invisible text, doorway pages, adding unrelated keywords to the page content or page swapping (changing the webpage entirely after it has been ranked by search engines), and the use of the domain name for spam activities.

I was not able to find the corresponding Afternic LTO statement, but would presume it will be provided prior to LTO becoming active for buyers, and will be similar, or identical, to the Dan terms.

A key concern raised by @jberryhill, is exactly who is the registrant during the LTO period, should a UDRP be launched.

Final Thoughts

Here are a few personal thoughts on lease-to-own.
  • Small businesses and startups may the option to spread out payments for a name into the future when they expect to be profitable very attractive. Offering a LTO option should increase sell-through rate.
  • A LTO option, particularly a lengthy one, helps alleviate ‘sticker shock’ of a domain name being priced much higher than the prospective buyer anticipated. This also should help improve sell-through rates.
  • Many domain investors run with low cash reserves, often needing funds from a recent sale to cover the next few months of renewals. Regular revenue through a number of active LTO plans may help provide regular cash flow.
  • When it becomes active, the LTO option on GoDaddy registrar search will make a difference. Now some buyers see a high price, and walk away, but if presented as a monthly price over 48 or 60 months, they might reconsider.
  • It is a fact of life that a considerable fraction of LTO plans will not run to completion. While that is unfortunate for both sellers and the marketplace, the seller does get to keep most of the money already paid, and regains the name.
  • Very long LTO periods may bring their own risks. That might include risks associated with stability of the marketplace, or other party, administering the program. Also, the longer the time period, the more likely harm may come to hurt the value of the domain name.
  • As a marketing strategy, the DomainMarket approach with a list price plus LTO option, but a discount for buying outright, would seem effective.
  • The domain community needs to do a better job getting the word out to the business community on the availability of lease-to-own domain name options, and exactly how they work. I have seen online confusion between rental plans and lease-to-own.
  • If you have a high-value name, be very sure that the LTO agreement, and prohibited uses, covers any way the name might be harmed.
  • While we naturally think of LTO in terms of selling domain names, I know of several domain name investors who have purchased names on LTO.

Please share in the comments section below your own thoughts and experiences, positive or negative, with lease-to-own.

Those associated with other marketplaces or services offering LTO should feel free to mention them in the comment section below.

Update July 26, 2023:
In response to social media comments by John Berryhill, including asking where the Afternic ToS for LTO buyers were, the official Afternic X account has confirmed that Dan LTO ToS apply to Afternic LTO sales, since Dan is used to close these sales.

Update Sept 1, 2023: To prevent confusion, one sentence was removed from the protections for buyers section as it does not reflect the current status of the Dan Terms of Service agreement.
 
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The views expressed on this page by users and staff are their own, not those of NamePros.
Thank you Bob

Being less optimist than you I'm going to hold to my view that according to the current DAN's ToS - unlike their past versions - there is no protection for the LTO-seller.

This is also consistent with DAN getting sequentially integrated into GD/AN system, about whose LTO-ToS J. Berryhill wrote

But the terms DO NOT, anywhere I can find, state that the buyer remains liable to the seller for the value of the domain name.



Fan fact: in that posting JB posted a tweet of AN stating that they intend to adapt to DAN's LTO ToS.

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As far as LTO-seller protection is concerned, it seems they made the opposite, they adapted DAN's ToS to theirs.
 
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