I’ve written a number of articles about domain name leasing. I’ve discussed the benefits of leasing a domain name, and I’ve also discussed the downsides of domain name leases. In 2009, I also wrote about additional problems with domain leasing.
In the last three or four years, I’ve leased a few domain names (as the domain name owner), and I’ve also discussed lease deals on a number of other domain names. For the most part, the deals either didn’t make sense to finalize or they fell apart after a drawn out negotiation. This has given me some personal insight into the hidden costs of domain name leasing, which I want to discuss today.
As the owner of the domain name, you need to be judicious in how your lease agreement is drafted. I would assume you are going to have an attorney draft your agreement, since not having legal advice for something like this would be like going to the supermarket for dental work. An inexpensive attorney might charge you a couple hundred dollars an hour, while most attorneys will charge more, and some will charge much more.
Domain attorney Zak Muscovitch had a great article about the considerations of a domain name lease agreement, and I think it’s a must read if you are contemplating a lease.
As you can see from Zak’s article, there are many things you and the person leasing your domain name must discuss. From my experience, most people who are going to lease your domain name will want to make many changes and requests to a standard lease deal, and that’s going to cost you. If you’ve looped an attorney in at the beginning (which is wise so you can get the agreement), and you expect his or her advice during the course of your negotiation, you’ve already added several hundred dollars (perhaps over $1,000) to your bill. Next, if you use a licensed escrow service, you might add hundreds of dollars more to your bill.
Before you have even started collecting payments for the domain name, you will likely be hundreds or quite possibly thousands of dollars in the hole. Now, if you are earning several hundred or thousands of dollars a month from the lease, it could be worth these hidden costs. If you’re like most of the people who have used the lease option because a buyer couldn’t afford your asking price, your lease is probably not going to cover the legal costs for a year or two.
We all have rosy thoughts when it comes to leases. We tend to think of these as sweetheart deals that will pay off over the long run. Unfortunately, many do not work out and all your hard work may go to waste after a couple of months of lease payments. At that point, are you going to sink more money into legal fees to try and enforce payments, or are you going to cut your losses?
Domain name leasing in theory sounds like a great idea. However, the hidden costs may not be worth it unless the deal is too good to pass u.