Domain Leasing: Lease to Own Complete Guide (2025)

Quick Answer

Table of Contents

What is Domain Leasing?

Domain leasing is an arrangement where a domain owner (lessor) grants temporary use of a domain to another party (lessee) in exchange for periodic payments. Unlike traditional sales, the seller retains ownership until specific conditions are met.

Types of Domain Leasing

1. Pure Lease (Rental)

• Lessee pays for temporary use
• Domain returns to owner at lease end
• Similar to renting an apartment
• Less common in domain industry

2. Lease-to-Own (LTO)

• Payments apply toward purchase price
• Ownership transfers after final payment
• Most popular model in domain industry
• Buyer uses domain during payment period

3. Lease with Option to Purchase

• Regular lease payments with purchase option
• Lessee can buy at predetermined price
• More flexibility but complexity
• Often includes "right of first refusal"

Why Domain Leasing Has Grown

The domain leasing market has expanded significantly for several reasons:

For Buyers:

• Access premium domains without large upfront capital
• Test domain performance before full commitment
• Preserve cash flow for operations
• Start building brand immediately

For Sellers:

• Generate recurring revenue streams
• Achieve higher total sale prices (35% higher on average per Afternic 2024 data)
• Retain ownership as collateral
• Access larger buyer pool

Lease-to-Own vs Outright Sale

Understanding when each approach makes sense helps optimize your domain investing strategy.

Comparison Matrix

Financial Example

Domain: TechStartup.io valued at $20,000

Outright Sale:

• Sale price: $20,000
• Platform commission (15%): $3,000
• Net to seller: $17,000 (immediate)

Lease-to-Own (36 months):

• Total price: $24,000 (with service fee markup)
• Monthly payment: $667
• Platform commission: 15% base + service fee split
• Net to seller: ~$18,500 over 36 months
• If default at month 18: Seller keeps $6,000+ and domain

When to Sell Outright

• You need immediate capital
• Domain market is at peak for your niche
• Managing payments isn't worth your time
• Buyer is highly motivated and qualified
• Domain value is under $5,000

When to Lease

• Domain is high-value ($5,000+)
• You want recurring income
• Buyer needs financing to afford price
• You want to retain ownership as backup
• Tax benefits from spreading income

How Lease-to-Own Works

The Standard LTO Process

Step 1: Listing Setup Seller creates lease-to-own listing with:

• Total purchase price (Buy It Now)
• Allowed term lengths (12-60 months)
• Minimum monthly payment (typically $100+)

Step 2: Buyer Selection Buyer chooses:

• Lease term length
• Payment schedule (monthly)
• Agrees to terms and conditions

Step 3: Initial Payment Buyer pays first installment:

• Platform processes payment
• Domain nameservers updated for buyer use
• Domain remains locked at registrar

Step 4: Ongoing Payments During lease period:

• Monthly payments collected automatically
• Buyer uses domain normally (website, email)
• Domain ownership remains with seller
• Platform handles renewals and DNS

Step 5: Completion or Default

If Complete:

• Final payment processed
• Domain officially transferred to buyer
• Seller receives final payout

If Default:

• Missed payments trigger grace period
• After grace period: Domain reverts to seller
• Seller keeps all payments received
• Domain can be relisted for sale

Domain Usage During Lease

The buyer can use the domain immediately for:

• Hosting a website
• Email services
• Marketing and branding
• Building business operations

However, the domain remains:

• Registered to the seller/platform
• Locked against unauthorized transfer
• Subject to automatic renewal by platform
• Protected from buyer misuse

Major Lease-to-Own Platforms

Afternic (GoDaddy Network)

Note: Dan.com merged with Afternic in September 2024 after two years of planning. The combined platform now operates under Afternic/GoDaddy.

Key Features:

• Price range: $495 - $100,000
• Terms: Up to 60 months
• Minimum monthly payment: $100
• International availability (May 2024)
• Bulk management via CSV

Commission Structure:

Service Fee Markup (Buyer Pays):

• 2-12 months: No markup
• 13-24 months: 10% markup
• 25-36 months: 20% markup
• 37-60 months: 30% markup

2024 Performance Data: Afternic reports that lease-to-own sales achieve 35% higher average sales price compared to Buy It Now purchases (January-June 2024 data, includes service fees).

Import Transactions: For deals negotiated elsewhere and imported to Afternic:

• Standard import: 5% commission
• Payment plan import: 10% commission

Escrow.com

Domain Holding Service: Escrow.com offers domain leasing through their holding service, handling payments and transfers.

Fee Structure (Updated May 31, 2024):

• Tiered pricing based on transaction amount
• $50 minimum fee
• $25/month holding fee for payment plans
• $250 fee for payment schedule changes
• $85 fee for administrative changes

When to Use Escrow.com:

• High-value domains where platform commission exceeds Escrow fees
• Custom payment terms not supported by other platforms
• Need for maximum transaction security
• Already have negotiated deal that needs escrow

Cost Example: $25,000 domain with 24 monthly payments:

• Monthly holding fee: $25 x 24 = $600
• Escrow fee: ~$214 (tiered)
• Total platform cost: ~$814

Compare to 15% commission on $25,000 = $3,750

Efty

Platform Overview: Efty is a domain portfolio management platform that integrated with Dan.com for lease-to-own processing (now through Afternic after merger).

Commission Structure:

• Transaction processing: 5% (historically through Dan.com)
• Efty Pay (launched 2024): 3.5% introductory rate until March 2025

Efty Pay Features (October 2024):

• Wire transfer support
• USD, EUR, GBP currencies
• 3.5% introductory commission
• Full platform coverage

For-Sale Landing Pages: Efty provides landing page templates (Fresku, Nubia, Nobo) that support lease-to-own integration.

Platform Comparison

Pricing Your Domain for Lease

Setting the Base Price

Your lease-to-own price should typically match or exceed your Buy It Now price. The platform's service fees provide additional revenue opportunity.

Pricing Formula Considerations:

Total Buyer Cost = Base Price + Service Fee Markup

Example: $10,000 domain, 36-month term
- Base price: $10,000
- Service fee (20% for 25-36 months): $2,000
- Total buyer pays: $12,000
- Monthly payment: $333

Monthly Payment Guidelines

Afternic Requirements:

• Minimum: $100/month
• Maximum term: 60 months
• Price range: $495 - $100,000

Practical Guidelines:

Pricing Psychology

Impulse Buy Threshold: Many domain purchases under $10,000 are impulse buys. Offering lease-to-own can convert hesitant buyers by making payments manageable.

Monthly Payment Sweet Spot: $200-500/month is often comfortable for small businesses, making domains in the $5,000-15,000 range ideal for LTO.

Contract Terms and Protection

Essential Contract Provisions

Domain lease agreements should include these key provisions (based on industry-standard templates from domain attorneys):

1. Use Restrictions

The lessee, in its use of the domain name, shall comply
with all applicable laws, whether state, federal,
provincial, or national.

• Prohibits illegal use
• Protects lessor from liability
• Grounds for termination if violated

2. Assignment Prohibition

Lessee shall not assign this agreement to any third party
nor permit any third party to use the domain name under
this lease.

• Prevents unauthorized subletting
• Keeps known party responsible
• Maintains control over domain use

3. Trademark Cessation

Upon termination, lessee shall cease any and all use of
marks, trademarks, business names, or monikers that
correspond to the domain name.

• Prevents continued brand use after default
• Protects lessor's future sale value
• Clear transition expectations

4. Indemnification

Lessee indemnifies and will defend lessor from all claims
arising out of or in connection with lessee's use of the
domain names.

• Mutual protection clause
• Covers legal fees
• Addresses breach consequences

5. Right of First Refusal

If lessor undertakes to sell the domain names, they will
offer lessee the right of first refusal at the same terms
offered to any third party, valid for 15 days following
written notification.

• Protects lessee's investment
• Standard 15-day response period
• Fair opportunity to acquire

Escrow and Domain Holding

Critical Question: Where is the domain held during the lease?

Platform-Managed:

• Domain registered to platform as trustee
• Automatic renewal handling
• Neutral third party control
• Standardized default procedures

Escrow.com Procedure:

• Review escrow agreement carefully
• Understand restoration procedures upon default
• Determine if WHOIS shows platform or lessor
• Verify privacy protection during holding

Default Procedures

Each platform handles defaults differently:

Afternic/GoDaddy:

• Missed payment triggers grace period
• Multiple missed payments = default
• Domain reverts to seller
• Previous payments retained by seller

Escrow.com:

• Defined in escrow agreement
• Clear restoration procedures
• Domain returned to lessor
• Payments handled per agreement

Tax and Legal Considerations

Tax Implications of Leasing

Spread Income Recognition: Lease-to-own spreads taxable income over multiple years, potentially reducing tax burden if you're near bracket thresholds.

Installment Sale Rules: In many jurisdictions, lease-to-own may qualify as installment sale for tax purposes. Consult a tax professional for:

• Installment sale treatment eligibility
• State-specific rules
• International tax implications
• Self-employment tax considerations

Legal Structure Recommendations

For Serious Domain Investors:

• Consider LLC or corporate structure
• Separates personal liability
• Professional appearance to buyers
• Consistent contracting entity

Contract Jurisdiction:

• Platform terms specify jurisdiction
• Custom agreements should define governing law
• Consider arbitration clauses
• Factor in international buyer implications

When Leasing Makes Sense

Ideal Scenarios for Sellers

1. High-Value Domains ($5,000+) Higher commission and service fees make the management overhead worthwhile only on larger transactions.

2. Recurring Revenue Goals If building passive income from your portfolio is a priority, lease-to-own creates predictable cash flow.

3. Uncertain Market Timing When unsure if market is at peak, leasing lets you capture value while retaining potential upside.

4. Portfolio Diversification Mix of outright sales and leases provides both immediate capital and ongoing income.

Ideal Scenarios for Buyers

1. Cash Flow Conservation Startups preserving capital for operations can acquire premium domains affordably.

2. Business Validation Test whether a domain generates results before full commitment.

3. Premium Name Access Domains otherwise unaffordable become accessible through financing.

4. Immediate Use Need Unlike waiting to save for outright purchase, LTO provides immediate domain access.

When NOT to Lease

Sellers Should Avoid Leasing When:

• Domain value under $2,000-3,000 (overhead not worth it)
• Buyer seems unreliable or unverified
• You need immediate full capital
• Market is clearly at peak value
• Managing multiple lease payments is burdensome

Buyers Should Avoid Leasing When:

• You can afford outright purchase easily
• Interest/fees significantly inflate cost
• You're unsure about long-term commitment
• Domain may not be critical to your business

Risks and How to Mitigate Them

Seller Risks

1. Buyer Default

Risk: Buyer stops making payments, leaving you with partial payment and need to resell.

Mitigation:

• Use platforms with automatic default handling
• Higher monthly payments = less loss if default
• Keep domain locked and controlled
• Quick relisting after default

Reality Check: "Unfortunately nothing prevents the buyer from defaulting on the transaction. All payments made to date are kept by the seller and the domain is returned to the seller and can be sold again."

2. Extended Time to Full Payment

Risk: Capital tied up for 36-60 months instead of immediate access.

Mitigation:

• Offer shorter terms (12-24 months)
• Higher monthly payments accelerate timeline
• Diversify with mix of LTO and BIN listings

3. Buyer Misuse During Lease

Risk: Lessee uses domain for spam, illegal content, or trademark violation.

Mitigation:

• Strong contract terms prohibiting misuse
• Platform monitoring and intervention rights
• Right to terminate for violations
• Indemnification clauses

Buyer Risks

1. Total Cost Higher Than Outright Purchase

Risk: Service fees add 10-30% to total cost for longer terms.

Mitigation:

• Choose shorter terms when possible
• Calculate total cost before committing
• Negotiate price if lease premium is high

2. Default Consequences

Risk: Miss payments, lose domain AND all previous payments.

Mitigation:

• Only commit to affordable payments
• Set up autopay to prevent missed payments
• Communicate with seller if temporary issues arise

3. Seller Insolvency

Risk: Seller goes bankrupt or disappears during lease period.

Mitigation:

• Use established platforms with escrow protection
• Verify domain is held by neutral third party
• Document all payments made

Setting Up a Lease-to-Own Listing

Step-by-Step: Afternic

1. Access Your Portfolio

• Log into Afternic account
• Navigate to portfolio management
• Select domain(s) for LTO listing

2. Enable Lease-to-Own

• Check "Lease to Own" option
• Set Buy It Now price ($495-$100,000)
• Verify minimum $100/month payment achieved

3. Configure Terms

• Select allowed term lengths
• Review service fee markup for each term
• Consider buyer psychology when setting options

4. Verify Nameservers

• Point to Afternic nameservers for 15% commission
• Non-Afternic nameservers = 25% commission
• Ensure DNS settings are correct

5. Activate Listing

• Review all settings
• Confirm listing terms
• Activate on Afternic marketplace

Bulk Setup (Afternic)

For multiple domains, use CSV upload:

• Download template from Afternic
• Fill in domain details and LTO settings
• Upload for bulk configuration
• Verify all listings after import

Step-by-Step: Escrow.com

1. Create Transaction

• Login to Escrow.com
• Select "Domain Name Holding" service
• Enter domain details

2. Define Payment Schedule

• Set total purchase price
• Define payment amounts and dates
• Agree on holding duration

3. Invite Buyer

• Enter buyer email
• They receive transaction invitation
• Both parties agree to terms

4. Fund and Begin

• Buyer makes first payment
• Domain transferred to Escrow.com holding
• Ongoing payments processed per schedule

Best Practices

For Sellers

1. Price Appropriately

   • LTO works best for domains $5,000+
   • Ensure monthly payment exceeds $100
   • Account for service fees in pricing

2. Use Reputable Platforms

   • Afternic, Escrow.com, Efty Pay
   • Avoid DIY arrangements without escrow
   • Leverage platform's default procedures

3. Monitor Active Leases

   • Track payment status regularly
   • Respond quickly to issues
   • Keep documentation organized

4. Set Realistic Terms

   • 24-36 months is sweet spot
   • Longer terms = more default risk
   • Shorter terms = higher monthly payments

5. Diversify Approach

   • Mix LTO with BIN listings
   • Don't rely entirely on lease income
   • Quick sales provide capital for reinvestment

For Buyers

1. Calculate Total Cost

   • Add all service fees and markups
   • Compare to outright purchase + loan interest
   • Determine if premium is worthwhile

2. Commit Only to Affordability

   • Don't overextend on monthly payments
   • Factor in other business expenses
   • Have buffer for unexpected costs

3. Set Up Autopay

   • Prevent accidental defaults
   • Multiple payment methods as backup
   • Calendar reminders for payment dates

4. Document Everything

   • Keep all payment confirmations
   • Save agreement terms
   • Note platform communications

5. Plan for Completion

   • Know exactly when ownership transfers
   • Prepare for domain management after transfer
   • Update business records when complete

Frequently Asked Questions

What happens if the buyer defaults?

The seller keeps all payments made to date, and the domain reverts to the seller's ownership. The seller can then relist the domain for sale. Platforms handle this automatically through their default procedures.

Can I change the payment schedule after starting?

Most platforms allow modifications with fees. Escrow.com charges $250 per payment schedule change. For Afternic, contact support for modification options. Some changes may not be possible.

How does lease-to-own affect my taxes?

Income may be recognized as received (installment method) or upfront depending on your jurisdiction and election. Consult a tax professional as treatment varies by location and situation.

What if the domain owner goes bankrupt during the lease?

When using platforms like Afternic or Escrow.com, the domain is held by a neutral third party, protecting buyers from seller insolvency. Always use established platforms with proper escrow procedures.

Can I use the domain immediately when leasing?

Yes, lease-to-own allows immediate use. The buyer can set up websites, email, and conduct business using the domain while making payments. However, the domain remains legally owned by the seller until final payment.

Is lease-to-own the same as domain financing?

They're similar but have subtle differences. Lease-to-own typically involves the seller directly, with the domain held by a platform. Domain financing might involve third-party lenders. In practice, both result in payment over time with ownership transfer at completion.

What's the minimum domain value for lease-to-own?

Afternic requires a minimum of $495. However, most experts recommend LTO only for domains $5,000+ because the management overhead and longer payment timeline isn't worthwhile for smaller amounts.

How do commission fees work with lease-to-own?

Afternic charges 15-25% commission on the base sale price. Additionally, buyers pay service fee markups (10-30%) for longer terms. The commission is deducted from seller payouts; service fees are added to buyer's total.

Key Takeaways

• Lease-to-own (LTO) expands buyer pool by allowing financing, achieving 35% higher average sales prices per Afternic 2024 data
• Dan.com merged with Afternic in September 2024, consolidating the major LTO platform options
• Best for domains $5,000+ where commission percentages and management effort are justified
• Sellers retain ownership during payment period, keeping domain as collateral against default
• Buyers can use domains immediately while making payments, building business value during the lease
• Default risk is real but mitigated by keeping payments received and regaining domain for resale
• Commission structures vary from 3.5% (Efty Pay intro) to 25% (Afternic non-GoDaddy nameservers)
• Service fee markups add 10-30% to buyer's total cost for terms over 12 months

Next Steps

For Sellers

1. Evaluate your portfolio for LTO-appropriate domains ($5,000+ value)
2. Create Afternic account if you don't have one
3. Enable lease-to-own on selected domains
4. Set competitive pricing with realistic monthly payments

For Buyers

1. Calculate total cost including all fees for LTO vs outright purchase
2. Verify affordability of monthly payments long-term
3. Research domain history using DomainDetails.com before committing
4. Set up autopay to prevent accidental defaults

Related Reading

• Domain Aftermarket Platforms Compared - Platform comparison including LTO features
• Where to Sell Domain Names - Complete selling guide
• Domain Escrow Services Guide - Safe transaction handling

DomainDetails Features

• Domain Lookup: Research domain history before buying or leasing
• Domain Monitoring: Track domains you're interested in
• WHOIS History: Verify ownership and registration patterns

Research Sources

• Afternic Blog: Lease to Own performance data and feature updates (2024)
• Dan.com/Afternic: Commission structure and merger announcements
• Escrow.com: Fee calculator and domain holding service documentation
• Efty Blog: Platform features and Efty Pay launch details
• NameSilo Blog: Domain leasing vs selling comparison
• NamePros: Community discussions on lease-to-own strategies
• Domain Name Wire: Industry news and platform updates
• DomainInvesting.com: Sales data and market analysis
• Domain Sherpa: Lease agreement templates and expert interviews
• OnlineDomain.com: Commission rate changes and fee comparisons