You may think it is a strange idea to write a blog about fees and how law firms charge their clients but it has been suggested to me that people would like to understand the thought processes behind the systems we use and it is not something that any law firm which is charging it’s clients fairly should be unhappy about discussing. Whilst none of us like paying a bill whether it is for car repairs, plumbing or legal advice I think it is long accepted that the businesses which provide these services and many more are businesses and need to be profitable to be successful!
The traditional way a law firm would charge its clients would be for the time spent giving them advice and working on their cases with an agreed hourly rate dependant on the experience and expertise of the lawyer. This has resulted for many years in quips from clients about the clock ticking. In many ways this basis for charging was sensible for the lawyer as we do effectively sell our time – the time we spend meeting with our clients, drafting their documents or representing them in court and settling their matters. What it costs us as lawyers to do their work depends on how long that work takes to complete and so providing an hourly rate breaking it up usually into 6 minute units so there are 10 per hour, recording them accurately and then totalling up those units and raising an invoice is an effective way of calculating what it costs to do the job. By calculating how many hours of fee earning we can expect from the lawyers in our business and what our overheads are in terms of building costs, training , administration and IT for example we can work out what those hourly rates should be and anticipate what is needed each month to make a practice secure and profitable.
This traditional way of working though is often not satisfactory for our clients who need to know what their exposure to costs is going to be at the outset in the same way as if they were for example having alterations carried out on their home. Very few of us would agree to a builder stating when starting work on your house that it will depend how many hours a job takes what it will cost. To this end therefore we need to use our expertise having done similar types of jobs before to calculate the time needed to complete a task and agree a fixed fee. In many cases this is what we do and can do very successfully – having learnt what type of property you are buying, how complex a will you require we can give a fixed price. Like the builder though for more complex work we do need to agree a fixed price for the work we do but specify if something changes we may need to reconsider our charges. If you tell your builder you want a kitchen fitting but then say you want a new bathroom as well then you would expect there to be a change in costs and the same applies to lawyers. As a firm we at Jacksons work hard to take detailed instructions to understand exactly what you want us to do and if there are small additional pieces of work will do our best to stick with an estimate provided but when a transaction or negotiation changes out of all recognition costs have to be reassessed.
There are many situations when we quote for work for clients and they suggest to us we can do the work proposed for less than the fee proposed. It is of course the right of everyone to try and negotiate the best price possible. However as a firm we will often decline to change our fee estimate even when we are told we need only give a job “a light touch”. We have a professional duty to carry out work to best of our ability and in the same way you would not ask your dentist to give minimal effort to your filling or your hairdresser to rush through your hair cut the work we do is too important to our clients not to do it properly. Our fees are based on our knowledge as to how long a piece of work will take to complete properly based on our experience of having done similar jobs and the time records we have kept to do them. Whilst our clients may now often want us to work on a fixed fee basis and we are happy to do so the information we gain from time recording is valuable for setting that fixed fee.
As lawyers we are now obligated to give a fee estimate at the start of any piece of work and to explain what work will be done for that estimate and to notify our clients in advance if there is any reason why such estimate might be increased. This is absolutely the right thing for us to do even if we were not obligated to do so. We are entering a relationship of trust when we are engaged and need to respect our clients need to anticipate their expenditure and their right to agree what they are going to spend in advance.
Whilst much of the work we do is based on fixed fees now there are times when it is very difficult to anticipate those fees because the work we may need to do cannot be anticipated. If we are instructed for example to work on a dispute we cannot know at the outset if such matter will be settled after a couple of letters, go to mediation or a full court hearing lasting days. In this type of work though we can still give a client some transparency as we can estimate costs for various stages. The client may however in such circumstances want to consider an hourly rate because were a matter to settle very quickly no client would want or expect to pay fees for an estimated mediation after weeks of negotiation. The difference within each stage could be thousands of pounds and whilst clients need to know the extent of the fees they may face they will also not want to pay for work which did not need to be done.
It would be wrong therefore to say that there are only 2 types of fees hourly and fixed because there are many nuances on this. Some lawyers will take risk and act on a no win no fee basis taking much of the risk of a case themselves. Sometimes we will agree blended rates when a team is working on a large transaction or series of transactions. Some clients because of the volume of work they give us get preferential rates. In the same way your coffee shop charges different rates for different coffees and extra for additions to the basic cup so we price together our pricing in much the same way. Legal fees should not be the mystery some people make them out to be and if we are being fair then transparency of fees in the legal profession should be nothing to be scared of. As a firm we have found that an open discussion on fees with clear explanations as to what things will cost and why make for a much more relaxed and trusting solicitor client relationship. If you want to talk to your lawyer about the fees they charge and why then you should do so but don’t necessarily expect that haggling will reduce those fees or enhance that relationship. A well calculated fee estimate following on from a clear and accurate client instruction will make the process transparent for both lawyer and client and is certainly the best way forward.
Jane Armitage, Managing Partner, Jacksons Law Firm.
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