How to Purchase Legal Services
In today’s legal environment, it is crucial for clients to be educated in consuming legal services.
Oftentimes, people come into our offices afraid to discuss fees or the nature of the firm’s billing practices with regard to their matters. It is important for every business owner and individual to understand how attorneys charge, what their billing philosophies are, and what the costs for services will total. In fact, the primary cause of difficulties between attorneys and clients is not over legal work, but rather billing practices. A thorough discussion up front will make you an intelligent consumer of legal services and help you in deciding which firm is best suited for handling your legal needs. There are essentially three ways you can be billed for legal services: hourly rate, contingent fee, or flat-fee (there are variations between all of these as well, but for purposes of this article we will deal only with the above).
Hourly Rate
Hourly rate is self-explanatory. The amount of work done on your file or matter is billed at an hourly rate in increments of usually 1/10ths of an hour. That breaks the hour down into six, ten minute increments. For instance, if your attorney charges $350 an hour, 2/10ths of an hour would cost $70; 1/10th of an hour would cost $35 and so on.
Typically, law firms will designate the easiest tasks of a file to lesser hourly rate attorneys who can handle the matter. Beware, however, of the firms that will attach two or three attorneys fresh out of law school that do not have the experience to understand the most cost-effective way to successfully complete your matter. This could lead to a much higher bill than what you expect. So, you should know who is working on your file, as well as their level of expertise and how that benefits you as a client.
Also, bills should include the following: the hourly rate, the initials of the lawyer who performed the services, a description of the services, and the time spent on that particular entry. Without that information, you will find it very difficult to associate what is going on in your file with the billed amounts, and whether or not the time the lawyer spent was effective from your standpoint. Therefore, detailed billing takes the mystery out of what work the lawyer has performed. In addition to it being detailed, billing should be monthly.
Finally, and most importantly, there should always be a written fee agreement that outlines the understanding between the parties. The agreement should outline the attorneys’ rates as well as the out-of-pocket expenses for which you are responsible. For most matters, a lawyer should be able to provide a range of fees from low to high as to the amount you can budget for any particular transaction or matter. The only exception to that rule is litigation, which oftentimes has multiple pitfalls that are unforeseen by counsel at the time of giving the estimate. With new clients, oftentimes a retainer is requested. A retainer goes into a law firm’s client trust account and is disbursed as the matter is billed, usually on a monthly basis.
Contingent Fee
The contingent fee is based on the outcome of the matter entrusted to the firm. This is very familiar to those who have engaged a personal injury lawyer. However, oftentimes real estate tax assessment matters are handled on a contingent fee basis, where a portion of the savings on taxes is taken as fees for any savings from the first few years of the new assessed amount to up to five years of the new assessed amount. Usually, a contingent fee is whereby the firm takes a percentage of the ultimate outcome of the litigation or matter and the client pays for the out-of-pocket costs (for example, the client would be responsible for all filing and other fees). This is easily quantifiable unless the firm charges for postage, mileage, and other miscellaneous costs. Make sure costs are spelled out in any fee agreement prior to entering into a contingent fee agreement. A typical contingent fee percentage is 33 1/3 % of the amount recovered. The contingent-fee arrangement should also be in writing, outlining fees and what the firm and client will pay for, respectively.
Flat-Fee
Finally, the last of the three popular forms of fee arrangements is the flat-fee amount. This is simply the firm promising to do certain legal work for a set dollar amount. Typically, flat fees are given for contract formation, probate and trust matters, and criminal matters, but may extend to other matters based on the positions of both the client and the firm. Flat-fee matters are obviously the most certain, as the client is assured the fees will not total more than a specific dollar amount. Again, you must examine the fine print in any fee agreement to ensure there are not add-ons or outs the law firm can take to deviate from the flat-fee agreement. The client should be put on notice in writing if the law firm believes the flat-fee agreement is no longer applicable to a matter because of a change in circumstances, giving the client the opportunity to disengage the law firm if it so desires.
Summary
In closing, hiring a law firm is one of the most important decisions you can make in having your legal matters handled. Certainty as to the type and accuracy of billing is the best way to maintain a good, solid relationship with the law firm, lawyer, and client. Handling billing up front and in a business-like manner ensures the quality of your legal services and starts the relationship off in a positive manner.
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