Buying a domain name puts two strangers on opposite sides of a stand-off. The seller will not hand over the domain until they are paid, and the buyer will not pay until the domain is safely theirs. When the parties are in different countries and have never met, neither side can sensibly go first, and that is the problem domain name escrow exists to solve.
In a domain name escrow arrangement, a neutral third party holds the purchase price and releases it to the seller only once the transfer of the domain has actually been completed. The mechanism is the same idea as the deposit a buyer of real estate pays into a solicitor's trust account, applied to an asset that exists only as an entry in a database. This article walks through how it works end to end: who the players are, the sequence the money and the domain follow, what escrow protects against and what it does not, and where a lawyer earns their fee.
What you are actually buying: a licence, not property
It is worth being precise about the asset itself, because it shapes everything else. A registration in the .au space is not ownership of property in the usual sense. In ATO Interpretative Decision 2005/354, the ATO observed that the customer who receives a domain name registration is not granted a proprietary right in it. What the buyer is really acquiring is a licence to use the name, granted under a contract with a registrar and subject to the rules of the .au Domain Administration (auDA), the body that administers the .au domain space.
That is why the escrow deal involves more parties than just the buyer and the seller:
- Buyer and seller: the parties to the sale. In a .au transfer, both must be eligible to hold the licence at the date of transfer, so a sale cannot proceed if either side fails the eligibility rules.
- The escrow agent: often a solicitor, who receives the purchase price into a statutory trust account and releases it only on the agreed conditions.
- auDA and the registry: auDA sets the policy for .au names. The registry that holds the database of registrations is operated by Identity Digital (formerly Afilias Australia), which auDA reappointed in 2023 for a term starting on 1 July 2024.
- The registrar of record: every .au licence has a registrar of record that manages it in the registry. The buyer and seller deal with their registrar to make the transfer happen, and the escrow agent deals with the registrar to confirm it.
- Dispute resolution bodies: where the parties disagree about rights in a name, the .au Dispute Resolution Policy (auDRP) and, for global domains such as .com, the UDRP administered by WIPO, provide a cheaper and faster alternative to going to court.
The escrow sequence, step by step
Once the price, the timing and the terms of transfer have been agreed, the deal runs through a set sequence. Each step produces something the next step depends on, which is exactly why holding the money in between works.
Agree the deal and the release conditions
The first step is the one that matters most and is the easiest to rush: setting out in writing what must happen before the seller is paid. The escrow instructions, sometimes called a trust account authority, should record the price, what is included in the sale, who pays the transfer fees, and precisely which event triggers payment, usually confirmation that the domain has been transferred. The buyer signs an authority authorising the escrow agent to release the money once that event occurs.
The buyer deposits the price
The buyer transfers the agreed amount to the escrow agent's trust account. If the agent is a solicitor, the money is protected by professional conduct rules. Under ss 247-248 of the Legal Profession Act 2007 (Qld), a law practice that receives trust money must keep a general trust account and deposit the money in it as soon as practicable. The practice can only deal with the money in line with a written direction from the client, and withdrawals are tightly controlled, so neither the solicitor nor anyone else can simply spend the deposit before the conditions are met.
The parties are verified
Before any transfer, the escrow agent checks the identity of each party and confirms through WHOIS that the seller is the registered holder of the name. For a .au licence, the agent will also want to confirm that both parties satisfy auDA's eligibility rules, because the transfer can only happen if both are eligible to hold the licence at the date of transfer. This is the point at which a pending dispute, a mismatched name or a non-existent business entity usually comes to light.
The change of registrant
The transfer itself is a change of registrant (CoR). Under auDA's rules, the current registrant initiates the change through their domain name provider, and the incoming registrant must enter a new licence agreement, meet all the requirements of a registrant and pay the licence fee. Any full years remaining on the licence carry over to the new registrant, up to the maximum licence period of five years. The licence is effectively re-issued from the date the CoR is completed, with an expiry date between one and five years later, while the original creation date stays unchanged. Registrars commonly charge a fee for processing the change, and that fee is separate from the purchase price.
Confirmation and release of funds
Once the change of registrant is complete, the new registrant's details appear in the public WHOIS record. The escrow agent checks the record, confirms the transfer has taken effect, and only then releases the money to the seller as full and final payment. If the transfer fails, the instructions determine what happens to the deposit, which is why they were drafted at the start.
How long it takes
auDA advises that a transfer of a .au licence between registrars can take up to three days to take effect once approved, and WHOIS records are usually updated within a few business days of that. Combined with bank clearing times for the deposit, a straightforward escrow deal is commonly completed within one to two weeks, though the timing depends on the registrar, the domain and how quickly both sides act.
What escrow protects against, and what it does not
Escrow protects both sides against the obvious failure: the buyer who pays and never receives the domain, or the seller who transfers and never receives payment. Because the money sits with a third party bound by professional conduct rules and written instructions, neither side can change their mind after the deal is struck without losing the benefit of the bargain.
But escrow is not a guarantee of the deal's quality. It does not confirm that the domain is worth the price, or that it will be worth anything to the buyer's business. It does not fix eligibility problems: if either party cannot hold a .au licence, the transfer simply cannot proceed. And it does not resolve disputes about who has the better right to the name in the first place.
That last point matters more than most buyers expect. auDA will not process a transfer while the licence is subject to a complaint under the auDRP, a Licence Review Panel matter or an internal review. A sale can therefore be frozen by a dispute that started long before the escrow was set up. Where the parties disagree about rights in a name, the auDRP asks three questions: whether the name is identical or confusingly similar to a name, trade mark or service mark in which the complainant has rights; whether the registrant has rights or legitimate interests in the name; and whether the name was registered or used in bad faith. A seller who knows a dispute is brewing should disclose it before the deal, because the buyer will find it in the WHOIS record and the transfer will stall regardless.
There is also a technical wrinkle to plan around. If the buyer wants the domain moved to a different registrar as part of the sale, the seller must provide a transfer authorisation code, known as the EPP authInfo code, and the registrar-to-registrar transfer can take up to three days once approved. There is no fee for that kind of transfer between registrars, unlike the change of registrant itself, and the domain cannot be moved while a dispute process is live.
When the domain is part of a bigger sale
Domain sales are often only one element of a larger transaction, such as the sale of an online business. The deal may bundle the domain with the website code, the hosting account, the customer database, social media accounts and goodwill. Each of those assets has its own transfer mechanics, and the escrow instructions should record exactly what is included so that the release of funds is not triggered until all of it has changed hands.
One point catches buyers out. Under auDA's rules, buying a business does not automatically transfer the .au licence with it. The licence must be transferred separately, and if it is being transferred as part of a contract or agreement such as a business sale, the transfer must be completed within 28 days of entering the agreement unless the agreement says otherwise. A buyer who assumes the domain came with the business can find the licence still registered in the seller's name a month later.
The tax question to check
Most buyers do not think about GST until the invoice arrives. In Interpretative Decision 2005/354, the ATO concluded that a domain name registration supplied by a non-resident registrar was not connected with Australia for GST purposes, so no GST applied to that particular supply by the offshore registrar. Whether GST applies to a resale by an Australian seller is a different question, and the answer turns on the seller's circumstances, including whether they are registered for GST and whether the sale is made in the course of an enterprise. It is worth a short conversation with an accountant before the price is fixed, because GST can change the effective cost of the deal by ten per cent if it applies.
Where a lawyer fits into the process
A domain name escrow can be run without a lawyer, but each stage of the sequence is a place where a mistake is expensive:
- Drafting the escrow instructions: so the release conditions are clear enough to act on if the deal breaks down.
- Holding the deposit: in a statutory trust account rather than an ordinary account, which professional conduct rules regulate.
- Verifying identity, WHOIS ownership and eligibility: before any money moves.
- Flagging dispute exposure: under the auDRP or UDRP, including names that look similar to an existing trade mark.
- Structuring the sale documents: when the domain is bundled with a business, so the 28-day licence transfer rule and the other asset transfers line up.
- Sorting out the deposit: if the transfer fails, so both sides know where they stand.
A lawyer is most useful at the start of the sequence, when the instructions are drafted and the asset is checked, and at the end, when the release conditions are confirmed. The middle of the process is largely administrative, which is why the cost of a simple, well-documented transfer with clearly identified parties can be modest. Where the parties have competing claims to the name, the work is more substantial and the fees reflect it.
The instructions decide everything if the deal breaks
The moment that concentrates the most value, and the most risk, is the drafting of the escrow instructions before any money moves. If the transfer fails, if the domain turns out to be locked in a dispute, or if one side simply changes their mind, the written instructions determine who gets the deposit and on what basis. That is the document a court, or the law society, would look at first. Getting it right is inexpensive compared with the deal it protects, and most firms will talk through the structure of a domain sale in an initial conversation without charging for it. The money and the domain can be moved safely; the instructions are what make sure they move in the right order.