There are different types of legal fee arrangements used when hiring a lawyer. It is important to distinguish between them in order to understand what is fair and appropriate. Understanding legal fees and retainer agreements is also essential to managing billing expectations and will help you estimate how much it will cost to hire a lawyer.
How Much Should I Pay a Lawyer?
What is an appropriate fee for a lawyer? How much should I pay for legal services? The answer will depend upon several factors which include:
- The geographic region
- The lawyer’s level of experience and expertise
- The lawyer’s reputation and record (a courtroom lawyer may consider percentage of cases won)
- How much time is spent on the issue and case
- How unique and/or difficult the issue in the case may be
- The results of the specific case (some agreements may provide for different fee levels based upon how much money is awarded to or recovered for the client)
- The actual costs and overhead required for performing the work (costs associated with New York City are usually greater than Cincinnati)
- The supply and demand for the work provided (high demand and short supply of legal expertise leads to higher prices)
The best way to assess how much it will cost to hire a lawyer is to comparison shop. It is prudent to contact several lawyers (perhaps using a lawyer directory) to discuss their experience, expertise and fees. Doing so will help you manage expectations and also help you identify the questions you need to ask when interviewing an attorney.
Types of Fee Agreements
There are several different types of attorney fee agreements.
A lawyer may charge a client an hourly or fixed fee for a first meeting. In this meeting, the attorney will review your case, discuss whether he or she can assist you and also provide expert legal insight into your case. Before meeting with a lawyer it is important to inquire about whether there will be a consultation fee and what it will cover. In many contingency fee cases (such as personal injury or employment related matters), an initial consultation will be free.
In this type of arrangement, the lawyer’s fee is contingent upon the lawyer winning the case. The lawyer is paid a percentage of the amount of money awarded to or recovered for the client. While the client only pays a legal fee if the case is won (from the proceeds), the client is still responsible to pay expenses, regardless of the outcome. It is common to see a one-third or 33% contingency fee although this number may range from 25 to 40 percent. Factors used for setting a contingency fee rate are usually based upon:
- The type of contingency fee case (personal injury lawyers, discrimination, collections)
- The likelihood of success of winning the case
- The likelihood (or not) of collecting money from the defendant(s)
- How far a case has progressed (if a new attorney is taking over for another lawyer)
- Limitations imposed by the court or state or federal law
- The amount of money in issue (with larger amounts of money, the lawyer may be willing to accept a smaller percentage of the proceeds)
Contingency fee arrangements may not be permissible or appropriate in certain types of cases such as criminal defense, divorce and child custody matters. The most common types of cases where lawyers accept contingency fee arrangements are personal injury, medical malpractice, employment discrimination and wrongful termination claims, class action lawsuits and collections.
When a legal matter is fairly simple or routine, a lawyer may charge a set amount as opposed to a fee that is determined by time or outcome. For example, creating a simple will, notarizing a document, reviewing a simple contract or sending a cease and desist letter might involve a flat fee.
Hourly Fee Agreements
When it is difficult to estimate the exact amount of legal work to be performed, a lawyer will typically be paid a set amount per hour. This is the most popular type of legal fee and the amount may also depend upon the type of legal work performed. A lawyer may charge $100 per hour for legal research and writing and $200 for court appearances. In addition, legal fees charged may depend upon the role of the person working on your case. A law firm partner usually charges the most, followed by a non-partner attorney (an “associate”) and paralegal (a trained and certified legal professional who is not a lawyer.)
After an attorney is hired or retained, a deposit may be paid to the attorney for legal work to be performed in the future. This up-front “fee” is placed into a separate attorney bank account where the cost of the legal services performed is deducted as accrued. You should make sure to have your attorney explain the retainer fee carefully, including how it is to be used and what part is refundable. The answers provided should be reflected in the “retainer agreement” signed by you and your lawyer. A retainer fee may also be kept with an attorney indefinitely, allowing a client to have access to attorney services “on call” and to handle legal problems quickly as they arise.
The amount or rate at which a lawyer is paid may be set by the court or by state or federal statute. These fees will typically appear in bankruptcy and probate proceedings.
This refers to an amount of money which one lawyer will pay another lawyer for referring a case. In many jurisdictions, referral fees are not permitted under state professional responsibility rules unless the lawyers adhere to specific requirements. This prohibition ensures that legal fees charged to a client are reasonable and not inflated by referral fees. In many instances, in order for an attorney to earn a referral fee, the attorney must also be officially retained and perform a reasonable amount of legal services to justify the fee. A local or state bar association may be able to help ascertain the reasonableness of a referral fee.
Additional Legal Costs and Expenses
It is important to discuss whether the lawyer’s fees that you may be charged include additional legal costs and expenses which may be incurred. In many instances, additional costs for legal staff, messengers, photocopies and other expenses will be added to the legal fees you may be charged.