Types of Legal Fees
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The type of fee arrangement that you make with your lawyer will have a significant impact on how much you will pay for the services.Legal fees depend on several factors, including the amount of time spent on your problem; the lawyer's ability, experience, and reputation; the novelty and difficulty of the case; the results obtained; and costs involved. There will be other factors such as the lawyer's overhead expenses (rent, utilities, office equipment, computers, etc.) that may effect the fee charged.
There are several common types of fee arrangements used by lawyers:
- Consultation Fee: The lawyer may charge a fixed or hourly fee for your first meeting where you both determine whether the lawyer can assist you. Be sure to check whether you will be charged for this initial meeting.
- Contingency Fees: The lawyer's fee is based on a percentage of the amount awarded in the case. If you lose the case, the lawyer does not get a fee, but you will still have to pay expenses. Contingency fee percentages vary . A one-third fee is common. 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. This type of fee arrangement may be charged in personal injury cases, property damage cases, or other cases where a large amount of money is involved. Lawyers may also be prohibited from making contingency fee arrangements in certain kinds of cases such as criminal and child custody matters. Contingency fee arrangements are typically not available for divorce matters, if you are being sued, or if you are seeking general legal advice such as the purchase or sale of a business.
- Flat Fees: A lawyer charges a specific, total fee. A flat fee is usually offered only if your case is relatively simple or routine such as a will or an uncontested divorce.
- Hourly Rate: The lawyer will charge you for each hour (or portion of an hour) that the lawyer works on your case. 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.
- Referral Fee: A lawyer who refers you to another lawyer may ask for a portion of the total fee you pay for the case. Referral fees may be prohibited under applicable state codes of professional responsibility unless certain criteria are met. Just like other fees, the total fee must be reasonable and you must agree to the arrangement. Your state or local bar association may have additional information about the appropriateness of a referral fee.
- Retainer Fees : 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 usually placed in a special account and the cost of services is deducted from that account as they accrue. Many retainer fees are non-refundable unless the fee is deemed unreasonable by a court. A retainer fee can also mean that the lawyer is "on call" to handle your legal problems over a period of time.Since this type of fee arrangement can mean several different things, be sure to have the lawyer explain the retainer fee arrangement in detail.
- Statutory Fee: The fees in some cases may be set by statute or a court may set and approve a fee that you pay. These types of fees may appear in probate, bankruptcy, or other proceedings.
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.