One of the features of Dan.com is that buyers can utilize a lease to own (LTO) payment plan to buy a domain name over a set period of time. Each month, the buyer makes a payment for the domain name until the domain name is paid-off in full. Payment plans can be as short as a few months or as long as five years. The Dan.com TOS covers some of the prohibitions
I’ve been under the impression that a LTO buyer can not actively sell a domain name before the purchase is paid in full. Outbound marketing of a domain name can be risky. For instance, attempting to sell a 3 letter .com domain name to a company that uses the 3 letters as its acronym or brand can lead to the company filing a UDRP or ACPA lawsuit. The company could cite the outbound email pitch as proof of bad faith registration.
When a domain name is under a LTO payment plan, the domain registrant would be responsible for defense costs associated with a UDRP or litigation. The buyer would likely stop making payments on a domain name that is subject of a UDRP or litigation, particularly if that was induced by actions of the buyer. In addition, I highly doubt the buyer would be willing to financially assist in the defense of a domain name that is owned by someone else.
Outbound marketing of a domain name may be risky, and I have always assumed it was prohibited during a LTO deal along with activities like distributing malware, sending spam emails, or selling illegal products or services.
A discussion on Twitter led me to ask Dan.com CEO Reza Sardeha about selling domain names during the course of a LTO deal. Reza answered the question and provided some clarity about what a buyer can do related to re-selling the domain name before paying off a LTO domain name in full:
When LTO’ing a domain, the buyer, at all times has to make sure to not engage in any activity that can hurt the value of the domain.
Doing outbound on a active LTO domain is therefor strictly forbidden.
However, listing the domain for sale on reputable marketplaces is allowed.
— Reza Sardeha (@rsardeha) August 12, 2021
If a buyer markets a domain name during a LTO deal and the seller learns of this, I suspect the seller could terminate the LTO deal and have the domain name returned while keeping the funds. That would be another question for Reza, but that seems to be possible.
My opinion on this is that you should take extra precautions for a high dollar domain. If I were to sell a $100k domain on a payment plan, I’d draw up a separate legal contract. But most of the domains people are selling on payment plans are not that expensive, and you probably don’t need to worry.
I agree. For most domain names, it’s much ado about nothing, probabilistically speaking. UDRP filings are quite rare.
As a lessor, you just have to understand the risks you are taking on by entering into an LTO contract at Dan.com and judge for yourself if you are being sufficiently compensated for those risks by the terms for the LTO contract (e.g., premiums earned for longer terms). If you are not comfortable with the risk/reward ratio, don’t use Dan LTO contracts. Consider using a separate, lawyer-derived legal contract that does comfortably compensate you for those risks. Of course, you have to consider the lawyer’s fees in that equation as well.
In the end it’s all about peace of mind, and for each of us that starts in our own heads.