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.