Types of Legal Fees

Types of Legal Fees

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In this article, we’ll briefly discuss the various fee arrangements that you may encounter when hiring a lawyer. As a general rule, the type of fee arrangement that’s selected will affect how much you pay to your lawyer in legal fees. The amount of legal fees payable will depend on a number of different factors, such as the total time spent on your matter, the lawyer’s experience and reputation in that area of the law, the novelty and difficulty of your legal issue, the result or outcome secured by your lawyer, and the costs involved in furthering your matter.

There are several common types of fee arrangements used by lawyers:

·      Consultation Fee: The initial consultation with your lawyer is usually free-of-charge, but that’s by no means a hard and fast rule. Some lawyers charge a flat consultation fee, while others may bill you by the hour based on their customary rate. Make sure to confirm with the lawyer ahead of time that you won’t be billed for this initial meeting.

·      Flat Fee: This type of fee arrangement is where the lawyer agrees to take on your case for a specific fee. The total fee is usually contained in your contract with the lawyer, otherwise known as the retainer agreement. If it’s not, you should insist that the lawyer include it. There’s a misconception out there that lawyers only offer this fee arrangement is your matter is relatively straightforward and uncomplicated. That isn’t always true, and in fact, more lawyers are offering this sort of fee arrangement for all types of matters, uncomplicated or otherwise. The benefit of this arrangement is, of course, the predictability of the fee, which allows you to better plan your financial affairs.

·      Hourly Rate: This is the traditional fee arrangement used by lawyers: you’re charged for each hour (or portion of an hour) that the lawyer works on your matter. Thus, for example, if the lawyer's fee is $100 per hour and the lawyer works 5 hours, the fee will be $500. This is the most typical fee arrangement. Some lawyers charge different fees for different types of work (legal research versus a court appearance). In addition, lawyers working in large firms typically have different fee scales with more senior members charging higher fees than young associates or paralegals.

·      Retainer Fee: The lawyer is paid a set fee, perhaps based on the lawyer's hourly rate. You can think of a retainer as a "down payment" against which future costs are billed. The retainer is deposited by the lawyer into their trust account, from which they withdraw every time they issue a bill for their services. This is typically done every two weeks, but can be monthly based on the particular practices of the lawyer. Another type of Retainer Fee arrangement is where the lawyer is “on call” sort-to-speak, only working on your matter when it’s needed. Since this type of fee arrangement can mean several different things, be sure to have the lawyer explain the retainer fee arrangement in detail.

·      Contingency Fee Arrangement: This fee arrangement is most commonly used by personal injury lawyers, as well as for wrongful dismissal matters, and workers compensation matters. The lawyer's fee is calculated based on a percentage of the amount recuperated on your behalf. As such, if nothing is recouped, then the lawyer doesn’t get paid a fee, but they’ll still be entitled to bill you for their expenses, like photocopying costs and other disbursements. As for the contingency fee percentage itself, it varies, but the most common is one-third of all recouped amounts. Some lawyers offer a sliding scale based on how far along the case has progressed before it is settled. Courts may set a limit on the amount of a contingency fee a lawyer can receive. There are certain types of matters where lawyers are prohibited from offering contingency fee arrangements, such as criminal and child custody matters. They’re also typically not available for divorce matters, if you’re the one being sued, or if you are seeking general legal advice.

With all types of fee arrangements you should ask what costs and other expenses are covered in the fee. Does the fee include the lawyer's overhead and costs or are those charged separately? How will the costs for staff, such as secretaries, messengers, or paralegals be charged. In contingency fee arrangements, make sure to find out whether the lawyer calculates the fee before or after expenses.