sales Domain Leasing Risks

[targetpro]

Got an offer today to lease a very strong category defining domain in an industry that is known for aggressive email marketing. My worry is that the user can pay for a month or two and essentially "burn" the domain by spamming it and/or getting it delisted in Google. It is an exact match generic that will rank #1 for a major keyword with minimal SEO effort.

When leasing, what sort of protection does the seller have? The lessee can destroy a name by spamming it by mail and potentially lose the domain name to registrar TOS violations. A domain can be delisted in Google and nearly impossible to relist (takes alot of time and money best case to relist). Or the lessee can create some infringing content that could lead to a UDRP.

It seems like leasing domains is a bad idea, unless you are dealing with a massive company that has signed an extensive contract that protects the lessor. But this type of company can usually just buy the domain outright anyhow. Leasing would be unusual by any well funded company, so I don't understand why people take the chance to lease? Seems way too risky for me. Thoughts?

 

[DanSanchez]

Great points so far here. In my opinion, leases are a great approach to extracting long term value out an otherwise single profit experience.

What you describe is a low entry point to a high value asset that would otherwise yield a big payout for the owner. Your risk is higher than I would personally recommend if the asset is truly a 6 figure asset, I say that because only around 3-5% of the domains today will get to that valuation.

There are very real risks to leasing any domain and they are very well presented here. A bad actor can certainly utilize a lease to minimize their entry cost to a big payout of their own. Question is, how can we safely operate with this model at a minimal risk?

My own experience with leasing so far has been where I currently work. Not trying to market here, but the truth remains. The premise of doing a "lease" without the backing of a trusted third party sounds terrifying, personally. And that's one of the key points I only saw one person mention in brevity.

My main goal with offering a lease to a known buyer (key aspect here will develop further) is to extract immediate and partial value from an asset without losing two things: 1. Title of ownership 2. Ultimate control of the asset.

The terms of a lease can be used to your advantage instead of being left to chance. I am using the first domain in my personal account as a sample case for the purposes of this discussion. 24HourDoctors (com) has a simple lease deal of $2,999 initial payment and $399 monthly, for 11 months. Possible yield of almost $7,400 in a year. It may seem like a lot, but for a high yield medical office, that may be their monthly advertising budget. This niche in particular falls under the "concierge medicine" so their yields are considerably higher than normal. My target price for releasing an asset that yields $7400 per year could be mid-high five figures! A true reflection of the value of an asset that continues to perform year-over-year for a business.

Here are a list of choices that I picked from,

Ultimately you can decide the exact length and yield from your individual domain,

And this is where the wall around your asset begins to take shape, you can read the full agreement on the parked page for detailed context.

The most relevant section of this agreement may be point 3. Operations - Read it and see if you could add anything further. It appeared clear to me that the user would instantly lose rights to the lease agreement if any of the violations can be quantified. This is where your responsibility comes in, in my opinion, you should be monitoring their use to some extent. See if any negative reviews pop up, or if they are CAN SPAM compliant, for example.

In essence, it may open up new venues for our assets to outperform current single-sale models. But it comes with certain risks and responsibilities. Leasing is not a single step process, you are being rewarded handsomely to maintain an asset that is likely going to increase in value with use. My opinion remains positive on leasing, we just need to take different approach to the process because it is truly different than single-sale models.

High value domains may yield even higher profits than something as niche as my example. I think we just haven't delivered the products for this to function at minimal risk yet. This could mean new companies or services from existing lease-leaders to develop with community input. Thanks for posting this thread, seriously.

My gears are turning.

 

[Rob Monster]

Domain leasing is a very effective way to bait the hook so to speak, i.e. to get an end-user on board with a domain that they will eventually buy.

On the other hand, there are domain speculators that are basically uses leases as options. We know who they are, and they have a role to play too.

In short, there is a growing group of speculators who are getting leases, seller-financings, or purchase options and then immediately trying to flip the domain in order to arbitrage the exit value.

One important reason we do give you the full contact details of the inquiring party is so that you can establish whether they are a logical retail buyer or a speculator.

So, yes, leasing is still great, but you have to know who is your counter-party before you give them the exclusive license to shop around your domain!

 

[targetpro]

It is a six figure domain and they know this and are supposedly willing to pay that six figures but over a few years. Just seems way too risky to even consider. Unless i'm missing something about the leasing market? A registrar can suspend your domain just based on a single spam complaint and Google can delist for so many reasons. I don't understand why somebody would give up control of their domain without insurance? It would be like letting somebody rent your car without a specific policy that covers this. So much can go wrong. Maybe another @Rob Monster service? Lease Insurance?

 

[bmugford]

Without a doubt a leased domain can be damaged by the usage of it.

If you have any lease it better have rock solid wording on that in the contract.
Even then, the damage could already be done.

Brad

 

[Recons.Com]

Request 20%-30% as upfront payment. If they pay 20-30K, they probably be careful not to damage the name. Even with the exact match dotcom, it will take lots of time and five figures+ expense to achieve top listing on search, so they will be actually building the reputation of the name, not destroying it.

Make sure your contract is strongly worded and that in case of the domain being damaged, the owner(s) provide personal guarantee to pay the balance and take the name on.

 

[EJS]

Without a doubt a leased domain can be damaged by the usage of it.

If you have any lease it better have rock solid wording on that in the contract.
Even then, the damage could already be done.

Brad

In addition to what Brad said, it can be expensive to have to legally enforce the terms of a lease should something go wrong and the other party disagrees. Depending on the third party escrow service holding the domain name during the term, it might require a court order or other legal ruling to decide who is right. This can be expensive and time consuming, especially if the counterparty is willing and able to fund litigation.

For instance, if the domain registrant has some sort of "no spam" clause in the agreement but "spam" is not defined within the contract, the parties may disagree on whether or not there was a violation. A third party escrow service holding the domain name would probably not become the arbiter because that would add more risk to them and potentially make them a party to litigation as well depending on the side they choose.

When it comes to leases and/or payment plans on my more valuable domain names, I go with my gut to determine whether or not to take the risk with the counterparty. I turned down a very large payment plan deal a couple of years ago because I was concerned the usage could seriously harm the value of my domain name.

Rob Monster probably has more experience administering leases and payment plans than I have.

 

[bmugford]

I would be skeptical when leasing a high value generic domain, unless the buyer has enough skin in the game.

If they, for instance, put a substantial some of money down they are more unlikely to do something that damages the value of the domain.

Brad

 

[Mister Funsky]

Thoughts?

Lots of good info in this thread and it has made me think a bit.

I have leased a name (one I consider to be supreme top tier) through Epik...there was no other pricing on the name other that the option to lease. It was only leased for a few months and the lessee never even asked for a sales price. They immediately put a white label 'news' site on it...very clean and professional looking. To my knowledge, they never tried to market the site/name. When they decided to let the name go, it was seamless and full control was returned to me.

I will admit I was concerned about possible damage to the name, but the monthly lease amount was more than fair and the standard terms and conditions (some of my own added) in the lease agreement provided by Epik made me feel that if any inappropriate activity happened with the name, it would be taken back from the lessor.

At least every 3 days I checked the site to make sure it was still 'clean'...only took a minute to check it.

 

[Bob Hawkes]

A lot of excellent points have been made in this thread. I am not sure that the recent blog post on payment plans has much to add, but thought I would mention it.

One thing that post covers is among the options for payment plans are individual ones drafted and supervised by a domain attorney. There are links to some handling this service, and undoubtedly others do as well. For really valuable domains that might be worth the expense, as it would help make sure various possible occurrences are covered.

The ToS of both Epik and DAN do cover lots of eventualities. I also agree that things like asking for a first holding payment as suggested by @Recons.Com , and checking the site every few days yourself as @Mister Funsky suggested, are good practice.

I also would make sure the domain is being held at a registrar that respects due process when complaints are made.

I think, as in most things, no matter how careful you are, there will be some risks. But really almost everything we do in domains is some balance of risk and reward. For me, how much I would consider this would be related to how sure I feel that I would get a similar level offer on the name without the lease requirement.

I really hope it works out, whether you decide to go that route or not @targetpro.

Bob

 

[targetpro]

i dont understand all the doom-and-gloom scenarios.

you’re making monthly payments to an accredited registrar who takes over makes process seamless beginning to end. i trust Epik more than “insured” Eacrow.com with my domain, for all leasing to buy needs

Samer

That has nothing to do with it. The domain can be suspended, cancelled, delisted or simply defamed. All of which destroy the value of the domain. It is like if you lease a car and crash it. Obviously the bank won't lease you the car without full insurance coverage. With a domain lease you don't have that protection. Again, it makes no difference who the counterparty or registrar is. It is YOUR domain and YOU take the hit with no compensation (other than whatever payments you received up to that date).

 

[Name Trader]

@targetpro - Thanks for this thread. I haven't done any leases, primarily because of the problems you have elaborated in this thread. To which I haven't seen any concrete solutions in here. Is there anywhere on NP where this has been discussed in length with some concrete solutions to these problems.

 

[carob]

For info or comparision have a look at these ToS on dan.com - they describe prohibited uses of a domain and the penalties that can bring.

https://dan.com/legal/terms-of-use

10.4 If the Agreement is entered into, the Transferee is solely entitled to use the domain name with due diligence. The Transferee shall not in any way use the domain name which in any respect:

a) is in breach of any law, statute, regulation or by law;

b) is fraudulent, criminal or unlawful;

c) promotes racism, bigotry, hatred or physical harm of any kind against any group or individual;

d) may infringe or breach the copyright or any intellectual property rights (including without limitation copyright, trademark rights and broadcasting rights) or privacy or other rights of the Third Party or any third party;

e) 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);

f) provides instructional information about illegal activities such as making or buying illegal weapons or drugs, violating someone's privacy, or providing, disseminating or creating computer viruses;

g) publicizes or promotes commercial activities and/or sales without our prior written consent such as contests, sweepstakes, barter, advertising, and pyramid schemes

h) involves the use, delivery or transmission of any viruses, unsolicited emails, trojan horses or any other computer programming routines that are intended to damage, detrimentally interfere with, surreptitiously intercept or expropriate any system, data or personal information.

10.5 Any (other) illegal activities as mentioned in paragraph 4 or any other activities which may cause damages to the Provider or the Third Party and/or which may decrease the value of the domain name are strictly prohibited. Such activities include, without limitations, 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.

10.6 In case of violation of paragraphs 4 and/or 5 the Transferee shall forfeit without that further notice of default is required a directly and not open to mitigation claimed fine of:

i) in case of a Additional agreement: the equal of twice the Price;

ii) in case of a Rental agreement: 24 (twenty-four) times the monthly rent; per violation to be paid to the Provider, notwithstanding the Provider's or the Third Party's right to claim the actual damages. The Transferee is furthermore obligated to limit any damages and/or undo the decreasing of the value of the domain name.

10.8 If the Transferee fails and/or neglects to carry out the terms as set out in the agreements, the Provider may terminate the agreement immediately without prior notice. The Transferee is liable to compensate all damages caused by this breach of contract.

 

[DAN.COM]

We have thousands of lease contracts running and only once the situation depicted occurred. And when it occurred, within 24 days we had taken down the domain and no damage was done to the value of the domain.

Contractually, DAN sellers can go in the legal route to claim damages if the buyer engages in illegal activity on a leased domain.

To conclude, the vast majority 99,99% of transactions go well because the buyer has a financial incentive to not engage in illegal activity on a leased domain either.

So we'd advice all sellers to not ignore the added value of leasing domains since the risk is proven very low if you use a trustworthy and reliable platform to manage your transactions.

 

[targetpro]

i only Lease to OWN.

misconception, lease is only rent.

i disagree with assessment of “risk” especially if you use reliable provider like Epik Escrow!

i’m currently financing$100 name, with $20 month and zero percent interest, and anytime i dont pay, they just re-process domain (u allowed to use while “lease” btw)

Epik is the best, and leasing should be utilized mpre

It makes no difference who you use or whatever the intention is to own or rent. The moment somebody uses your domain in commerce, you can lose that domain for a multitude of reasons (usually abuse). And the lessee is not going to keep paying the lease if the domain is suspended or delisted from Google even. Your domain becomes a brick or close to it. Then what?

 

[targetpro]

You could make an insurance then, specified in the terms and conditions. If they make you lose the domain for bad practices (practices specified on the leasing contract) then they must pay you the total price of the domain.
I am just thinking about a solution

Sure but they would need to put the entire amount in Escrow and that means they have the money to buy the domain in the first place, so why lease? The only time I can see leasing working is with a extensive due diligence and a very established company that enters into binding contracts. But again, a company like that would likely just buy the domain outright as the legal fees and payments probably just a hassle, unless we are talking an 8 figure deal or something.

 

[sharfab]

A smart way of doing business is to do your own due diligence and to make sure there is minimal to no risk in transacting your business deal. Just because a "lease option" is offered to you does not mean that it may apply to every business model or your current situation. A person would have to evaluate if the risk is greater than the success they are trying to achieve. If a person is interested in a leasing option, then we need to look at the systems that worked for years. Our society's protection system for risk and/or loss of assets is "insurance". This is a long standing practice that is widely accepted and utilized globally. Rental companies such as car and furniture businesses will sell you insurance and create specific language in their contracts catered to protect their product from the customers liability. These companies will not give you their merchandise under leasing terms unless you have insurance. A solution to the leasing option is some type of asset insurance or assurance with specific contact language to protect the domain name from the risk that was mentioned in this thread topic. The language in contracts is very critical in establishing the sellers innocence while proving it was the buyer who reneged on trust. Another solution could be to require enough down payment to give added comfort to offset any monetary damages that may occur from the buyer.. IMO...

 

[Rob Monster]

A domain name can also be cancelled by a registrar and then just drop - most have ToS letting them do that. Look at the Gab.com case where the domain had to leave GD in 48 hours or else. And that apparently also involved a payment plan via escrow.com.

In another thread we learned that Epik too have just outright cancelled the registration of problem domains.

@carob.

Actually, you will need to back that up with some facts.

Our general policy is to hand someone their auth codes and deny service.

The main exceptions are payment fraud, verified phising and/or child porn where the domain is less than 5 days old. We reserve the right to delete those.

Feel free to name a specific domain and we can discuss that case. However rest assured that we don't have a heavy hand when it comes to deleting customer domains.

 

[Sutruk]

Are they just interested in lease? I mean, did they ask for the price? or did they just asked you for a lease, without asking the price of the domain?
Because this can indicate a lot about their intention to use the domain.

 

[Samer]

i only Lease to OWN.

misconception, lease is only rent.

i disagree with assessment of “risk” especially if you use reliable provider like Epik Escrow!

i’m currently financing$100 name, with $20 month and zero percent interest, and anytime i dont pay, they just re-process domain (u allowed to use while “lease” btw) and can pay off the rest, whenever to own %

Epik is the best, and leasing should be utilized more.
To each his own, different solutions, different needs,
you probably operate on a larger scale than $100, but —no chance i was goin to drop $100 up front on this one

 

[Samer]

Tell them the domain is only for sale. Tell them to go to their bank and ask for a loan They will pay monthly, but to the bank.

i dont understand all the doom-and-gloom scenarios.

you’re making monthly payments to an accredited registrar who takes over makes process seamless beginning to end. i trust Epik more than “insured” Escrow.com with my domain, for all my dn leasing needs

Never give away freedom of taking ownership one day.
never enter lease without option to buy, so maybe, i try, control, as many things can stem out control as possible.

Samer

 

[capybara]

Why not share all your concerns* with the inquirer and suggest them to work out the contract terms with the lawyer**, where all usage conditions, prohibited practices, liabilities etc. would be covered. The legal costs are to be paid by the inquirer upfront, of course. A legitimate, "clean" buyer with long-term plans for the domain should not have any issues with that.

* – you'd have to think on the wording carefully, "hey I think you can be a scammer" might sound rather insulting.
** – John Berryhill is recommended.

 

[Rob Monster]

Are you saying you have never deleted a domain? An former employee has stated on Namepros that you have - it's your call whether you want to name the domain(s) and give your reasons.

https://www.namepros.com/threads/wh...-and-rob-monster.1128748/page-45#post-7196317

Where your staff member said:



.
and:
https://www.namepros.com/threads/wh...-and-rob-monster.1128748/page-45#post-7196289

Registry-level delete of domains is an extremely rare case and anyone who knows Epik also knows that we have a light hand when it comes to censorship.

The more likely scenario of an undesirable customer is that the domain owner is required to leave Epik. We hand them their auth code and help them move out. As long as the user is not breaking any very obvious laws, we will apply a sort of Hippocratic standard of "do no harm".

The main cause for deletion is phishing which is increasingly common with certain cheap TLDs. Because we do allow registrations with cryptos, we will occasionally see people register domains with unlawful intent. Those domains are going to be promptly deleted.

You would be very hard-pressed to find anyone engaging in lawful activity who has ever had their domain registry-deleted by Epik. I will pay $1000 to a charity of your choice if you can find incontrovertible proof of a s single example of a specific domain that was lawfully engaged and was deleted at the registry by Epik.

 

[Sutruk]

It makes no difference who you use or whatever the intention is to own or rent. The moment somebody uses your domain in commerce, you can lose that domain for a multitude of reasons (usually abuse). And the lessee is not going to keep paying the lease if the domain is suspended or delisted from Google even. Your domain becomes a brick or close to it. Then what?

You could make an insurance then, specified in the terms and conditions. If they make you lose the domain for bad practices (practices specified on the leasing contract) then they must pay you the total price of the domain.
I am just thinking about a solution

 

[Sutruk]

Also, what if a company gets a bad reputation with your domain for scamming consumers or whatever? It can end up on RipOffReport and ComplaintsBoard and ConsumerAffairs or even the BBB if they use the .com as their company/brand name. You will never be able to kick this reputation for anybody searching even years later. So risky to put six figures of value in somebody's hand for a couple thousand dollars or whatever. Makes no sense to me?

Ask them to pay the half in advance, then lease the rest.