Renting a domain name: a good idea?

25 August 2020

Renting a domain name sometimes seems like a cheap alternative to buying one. But there are some pitfalls. We list the pros and cons of domain name leasing and tell you what you have to watch out for.

Domain name leasing/renting

A good domain name is the basis of your online business. The ideal domain name is short, easy to remember and search-engine friendly. You will undoubtedly find a good domain name for the .be domain extension. But most short domain names have already been registered for the .com extension. You can buy that domain name, but the prices can run high, as you can see at the auction website Sedo.

As a starting company you might not have the means to pay such an amount. If the owner offers you an alternative – renting the domain name instead of buying it – you might be inclined to accept the offer.

On the other hand, if you own a good domain name, you will not want to give it away so easily. Renting out that domain name seems to be a good solution: you keep your virtual real estate hoping that it will increase in value, and in the meantime you will generate income.

But is renting/letting a domain name legal?

The negative aspects of domain leasing

For the landlord: legally, there is no objection to renting out the domain name that you own. As the owner, you may put your website on it, offer a third party the opportunity to place his website there, or not to place any website at all.

But there are objections on the ethical front. Renting out domain names encourages abuses such as domain speculation. Speculators buy up a whole series of good, short domain names for the sole purpose of selling or renting them out later for a lot of money. This leads to high costs for start-ups if they want to find a good domain name for their online business.

Or the tenant: you have to be aware that you, as the tenant of a domain name, are in a weak position. The owner of the domain name is the only one who can manage the domain name, i.e. link it to a website, a mailbox, etc. DNS Belgium is therefore not in favour of renting/leasing a domain name.

If you rent a domain name nonetheless, make good arrangements

If you have set your sights on a certain domain name and have no other options than to rent it, make sure you make good arrangements with the landlord and put everything on paper. Without a written agreement, it is your word against the landlord’s.  And if the owner decides tomorrow to change the DNS record so that visitors are no longer led to your website, where does that leave you?

The agreement must contain the following provisions without fail:

  • In the case of a pure rental, you state clearly the start and end date of the term (one year, three years, or one month, etc.)
  • In the case of a rent-purchase contract, you also get the option to buy the domain name when the agreed rental period has expired. Mention clearly what the purchase price will be and when it has to be paid.
  • The rent of course. This depends on the term and the type of agreement. Short-term rentals will be more expensive than long-term rentals for instance because of the administrative formalities.
  • State clearly whether the price has to be paid in advance (per month, per 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’ (pre-emptive right) in the agreement. That gives the owner the right to sell the domain name to third parties if he gets a good offer – even if your lease is still running.

Beware of abusive domain name rentals 

The pure rental of only the domain name will probably not occur as often in the .be zone as with .com, for instance. What you will encounter more often with .be is that the domain name is offered together with other things. You sign up for one package that includes hosting , e-mailboxes, template for building a website and e-commerce module, etc. It suddenly turns out afterwards that you do not own the domain name, and that you can use it only temporarily as long as you pay for the package.

This actually comes down to an improper rental of the domain name. Although there is nothing legally wrong with such an offer, we nonetheless advise you to go through all terms and conditions thoroughly, so as to be spared unpleasant surprises later on. Nothing is as annoying as suddenly finding out at the end of the contract that you don’t own the domain name and cannot move it to your new supplier. 

Registering a good domain name: be there on time

Renting a domain name is complex and puts the tenant in a weak position.  Like most other registries, DNS Belgium is not in favour of this practice. Owning your domain name is still the best option. Here are some tips for a good domain name:

  • Be discrete about your business plan; don’t communicate about the company name you have in mind beforehand, but register it immediately.
  • Choose only a company name for which you can register the matching domain name.
  • Is the .com domain name no longer available? Try one of the many new domain extensions such as .immo, .vlaanderen, .guru, etc.

With this article, we support the United Nations Sustainable Development Goals.