Renting (out) a domain name?
Renting a domain name sometimes seems like a cheap alternative to buying it. But there are some pitfalls when renting a domain name. We set out the pros and cons, and tell you what to look out for.
Renting (out) a domain name
The internet has grown exponentially in the past two decades. And as it grows, there are more and more domain names. So your preferred domain name may already have been registered for a popular domain extension. You can then try to buy over that domain name, but prices can be high, as you can see at the auction site Sedo.
The domain name owner’s suggestion that you rent the domain name instead of buying it may seem like a good alternative.
Renting out the domain name may seem a good solution also from the point of view of the owner who would rather not give it up. After all, you keep your virtual property, hoping it will still increase in value, and in the meantime you still generate income. Just like renting out real estate, in other words.
But is renting (out) a domain name legal?
Negative sides of domain leasing
For the lessor
There is no legal impediment to renting out your domain name. As the owner, you may put your own website on it, or give someone else that option, or not put a website there at all.
But objections do arise on the ethical front. This is because domain name renting encourages abuses, such as domain speculation, whereby speculators buy up whole series of strong domain names, only to sell or rent them later for a lot of money. This puts high costs on start-ups if they want a good domain name for their business.
For the lessee
You should be aware that as a domain name lessee, you are in a weak position. Only the owner can manage the domain name. This is exactly why DNS Belgium is not in favour of renting/leasing a domain name.
Want to rent a domain name? Then make good arrangements
If you have set your mind on a particular domain name and have no other option than to rent it, be sure you make good arrangements with the lessor and put everything in writing. Without a written agreement, it is word against word in case of a dispute.
The agreement should include the following provisions without fail:
- In the case of a pure rental, clearly state the start and end date of the term (one year, three years, or one month...).
- In the case of a lease-purchase contract, you also get the option to buy the domain name when the agreed lease term expires. State clearly at this stage what that purchase price will be, and when it is due.
- The rent, of course, which depends on the term and type of agreement. A short-term rental will be more expensive than a long-term one, for example, because of the administrative red tape.
- State clearly whether the price is payable in advance (per month, six months, per year).
- If the rent can be adjusted during the course of the lease, agree on what basis: the consumer price index, for example, or opt for a fixed amount per year.
- Do not accept the proposal to include a 'right of first refusal' in the contract. This gives the owner the right to sell the domain name to third parties if he receives a good offer for it - even when your lease is still running.
Beware of improper domain name rentals
A practice that sometimes occurs is that the lessor offers the domain name together with other things. You sign up for a package that includes hosting , mailboxes, a template for building a website, an e-commerce module, and so on.
It subsequently turns out that you are not the holder of the domain name, but only get to use it temporarily as long as you pay for the package. So this actually amounts to an improper rental of the domain name.
Although there is nothing legally wrong with such an offer, we still recommend that you go through all the terms and conditions of the lease agreement thoroughly, so as to avoid any unpleasant surprises later on.
There is nothing more annoying than to find out suddenly at the end of the contract that you have no ownership right on the domain name and cannot transfer it to your new provider.
Registering a good domain name: do not put it off
Renting a domain name is complex and puts you in a weak position as a lessee. Owning your domain name yourself is still best. Some tips for registering the most suitable domain name:
- Be discreet about your business plan; do not communicate in advance about the business name you have in mind, but register it right away.
- Choose a company name for which you are sure you can register the matching domain name.
- Is the .com or .be domain name no longer available? Try one of the many new domain extensions, such as .immo, .vlaanderen, .guru, etc.