By: Emilee B. Gehling and Kecia C Van’t Hof
July 2020
The fees and costs associated with attorneys are often a deciding factor on why a client decides to go with a certain attorney. It is important to understand that fees and costs are much more than just a number when dealing with legal matters. In order to understand why a lawyer charges the amount that they do, you must first understand the complexities of the legal billing: What does each fee mean? Why do certain matters get charged certain fees?
In the legal sphere there are several ways that an attorney can bill his or her clients. These include retainer fees, contingent fees, hourly rates, flat fees, and referral fees. Let’s break down each of these to get a better understanding of what they are and why an attorney might have their client pay one over the other, or more than one, during the pendency of a case.
The first type of fee is a retainer fee. A retainer fee is a common type of fee and is typically referred to as a “down payment”. Retainer fees are acquired at the beginning of the case, before any work has been started. The money is put into the client’s “trust” account and while work is being done for the particular client, the attorney will use the money in the trust account to pay for their services and advanced costs until it is used up.
The second fee is a contingent fee. The attorney does work for the client and receives no money during such work, but the client and attorney agree that at the end of the case, the attorney will receive a certain percentage of the money awarded to their client. It is important to note that contingency fees are restricted for some cases and would be deemed unethical. For example, in divorce cases, an attorney is not allowed to accept a contingency fee for the resulting award of support from the opposing spouse. Contingency fees are normally used in debt collection, medical malpractice, car accidents/insurance disputes, and other personal injury type cases.
The most common fee, which is normally coupled with retainer fees, is an hourly rate system. This is where the attorney and the staff who work on your case will charge you a certain amount per hour. The attorney will charge an hourly rate, as well as a lower rate for the attorney’s staff. Further, the rate can be different for the different types of services that they provide. That is, an attorney can charge different amounts per hour for their time in court, their time producing documents for you, and for their time communicating with opposing counsel or anyone else that is needed in assisting with the case. Hourly rates are generally based on the complexity of the type of work being performed. The rates should be communicated to clients at the start of any work and before rate increases take effect.
The final type of fee is a flat rate fee. This fee is typically reserved for services that are usually less complex or more predictable in nature. These services typically include; wills, deeds, title opinions, and some contact review.
The different fee types are important to understand so that when you receive an invoice you are not surprised by the total. Before hiring an attorney, make sure that you discuss what types of fees will be charged and seriously consider your ability to pay such fees. You don’t want to hire an attorney and end up not being able to pay them. Further, keep in mind that an attorney’s rates may reflect the complexity of the work, how specialized it may be, an attorney’s level of experience, geographic region, and how in demand an attorney is.
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