How can you know if there is a lien on a domain you want to buy?

[scrsteven]

How can you know if there is a lien on a domain you want to buy?

For example, I contact John Smith with an offer on his domain xyz.com.
We negotiate and he finally accepts my offer. We use escrow.com. I pay, he transfers the name, he gets his money.
A month later, a bank comes to me saying the name is theirs as they had a lien on all of the seller's property. The seller of course has disappeared in online anonymity.

When you purchase the domain, how do you know you aren't buying a domain with a lien on it? (Other than simply asking the seller who would be happy to lie)

 

[Duckinla]

I have never heard of liens on domains. Domains don't have titles like cars and property. I'm not sure a lien can be put on something that has no title. I think the bank would make a personal loan rather than a lien based loan.

 

[Deleted member 5660]

Network Solutions went to a lot of effort to get the VA supreme court to say that could not be done because the domain is a service. I think there are other cases/states that say different. I guess you could set up a company in a VA or ina state that considers domains not property.

http://www.phillipsnizer.com/library/cases/lib_case106.cfm

 

[scrsteven]

So, that clarifies it for Virginia... thanks for the good link consumers.
However, that doesn't help me in Florida buying names from Jimbo in Guatemala, as far as I can tell.

How do DomainCapital's services on financing names, and pawn-shop type agreements on domains, figure into this?

 

[typist]

I think in many cases people who accept domains as collateral for a loan will want to be registrant of record themselves while you owe them money, and simply license you to use the domain meanwhile.

 

[Duckinla]

I think in many cases people who accept domains as collateral for a loan will want to be registrant of record themselves while you owe them money, and simply license you to use the domain meanwhile.

Good point. If you buy a domain from the owner of record, I really doubt there is any way someone else can lay claim to it once you own it.

 

[Domainator]

There is no possible way a bank or anyone could put a lein on a domain name with at least trasferring ownership or "registration" rights to the bank itself. If you obtain a name "legitimatly" and the banks name was not on it, I don't think you need to worry...I am not an attorney, so you cant hold me to an "opinion", however, this is my opinion as a domainer. Can you share more details of your situation?

 

[H2FC]

I don't think domain's are owned, registration rights are owned. But I don't know how trademarked names fit into this. Is a name "owned" when it is a trademarked name? Anybody know?

 

[Domagon]

The only realistic way a lending institution could put a "lien" against a domain is to have the owner change the registration information for the domain to that of the lending institution or some related third party.

For a "lien" to be effective, it needs to be recorded in a manner in which the general public would know where to easily find it ... as of now, for domain names that means the registrant in the whois would need to be updated to reflect ownership by an entity associated with the "lien" holder.

Ron

 

[davidthornton]

*

 

[jberryhill]

There are a lot of good comments in this thread.

As noted, lenders that know what they are doing perfect a security interest in the domain name by holding the registration itself.

Consider, for example, a car loan. The bank holds the title to the car, and the owner cannot transfer the car. As pointed out, there is no separate document of title which vests domain "ownership" in the holder of that document. Accordingly, the domain registration itself should be held by the party wanting to perfect a security interest in the domain name.

That said, there is no shortage of interest holders who do not know what they are doing. They will loan money on a domain name and then file a UCC statement with the secretary of state, or some other crazy thing that nobody would ever check when purchasing a domain name from the putative registrant.

I continue to scratch my head and wonder about the folks that want domain names to be "property".

 

[Dave Zan]

I continue to scratch my head and wonder about the folks that want domain names to be "property".

Don't bother, John. How many people give that a long hard thought seriously?

 

[typist]

How many people give that a long hard thought seriously?

I haven't bothered to count them, but there are quite a few who talk about internet real estate or - this is my favorite - virtual real estate.

 

[B.King]

The bank is at fault here if the domain was under lein to them they should have had the domain under their control

 

[Duckinla]

I think the question has been answered. A legal lien would be attached to a title. Without a title, the lienholder would need to hold the registration to be protected. So no, you don't have to worry about buying a domain that has a lien attached to it as long as you receive ownership of the registration.

 

[Dave Zan]

Like the registrar cares without a valid court order.

 

[labrocca]

I continue to scratch my head and wonder about the folks that want domain names to be "property".

If domains ever become a property we are all going to be screwed every tax year. Domains are a service provided by ICANN...they are rented services which we pay a yearly fee for.


To speak to OP...domains can't have liens on them and if someone told you this...they are lying and most likely are trying to scam you.

 

[typist]

If domains ever become a property we are all going to be screwed every tax year

Frank Schwarz would probably disagree from his tax residence in the Caymans...
http://www.internetcommerceassociation.com/issues.html

 

[Deleted member 5660]

If domains ever become a property we are all going to be screwed every tax year. Domains are a service provided by ICANN...they are rented services which we pay a yearly fee for.

Why do you say this? As far as I can see it won't matter as far as taxes but maybe I am missing something.

 

[Domagon]

A domain is often an intangible property. However, this depends in some part on whether the domain is registered in a "root" (ICANN) recognized TLD along with how the domain is (could include future plans) utilized.

What trips many people up is the belief that property is always physical - that's not so ... surely most everyone here has heard of intellectual property.

Virtual real estate is a very apt phrase to describe the domain resale business, since there are so many simularities to physical real estate.

To digress a bit, some say that domains are "rented" ... one could make a similar argument for physical property - in most places, at least in the U.S., if one doesn't pay their property taxes, city water bill (where applicable), etc on a regular basis they lose their property.

How a domain is treated for tax purposes depends in large part on the context. To the best of my knowledge, the IRS has not definatively ruled one way or the other on the issue of domains ... and I doubt they will anytime soon.

For some here, in regards to taxes, their domains may be better viewed better as "inventory". But for many others here, their domains (not including what's on them), for tax purposes, are likely best treated as intangible property.

In short, there is no one simple answer for the tax aspect at this time ... really comes down to one's particular situation; hiring an experienced accountant who is up on technology and can navigate the mind boggling world of taxes.

Ron