How Lawyers Set Their Fees
Many persons fail to seek needed legal advice because they are uncertain about the cost of a lawyer's service. They try to save legal fees by doing their own legal work, or by depending on a non-lawyer for legal advice. Too often, these persons find out later that they are involved in a serious legal problem that could have been prevented had they seen an attorney first. As a result, they may end up spending days in court, with the increased costs involved, and face the possibility of losing substantially more than what a lawyer's initial advice would have cost.
What will it cost? If you have a problem and feel that you need the advice of an attorney, don't hesitate to see one because you are uncertain about the cost. Instead, when you first see the attorney ask about the fee. The lawyer will want you to be satisfied with both the service and the charge. The attorney knows that if good service is given, and the charge is fair, you will return and will also refer other clients to the attorney. That is the way a lawyer builds a practice.
Types of fee arrangements. The three most common types of fee arrangements are:
- Time billing
- Contingent fees
- Flat rate
While there are many types of fee arrangements which are possible, most are one of these, or a combination of them.
With time billing, the client is charged for the amount of time the lawyer and staff spend on the client's problem. This is probably the most common fee arrangement.
Contingent fees depend on the outcome of the case: the attorney is paid a fee out of the proceeds collected on the client's behalf. This type of fee arrangement is most common in cases where the client has been injured, but is sometimes used in other cases. Attorneys are not allowed to have a contingent fee arrangement in most family law matters.
Flat rates are sometimes used in instances in which the client's problem is relatively well-defined, and the attorney can tell in advance how much time and effort is likely to be required. With a flat fee arrangement, the attorney agrees to perform a specific service for a specific fee. The client knows in advance how much the service will cost. Flat fee arrangements are most often used in uncontested divorces, incorporation of small businesses, simple wills, and simple bankruptcies. Where there is a significant amount of disagreement, or a complicated situation, it is usually not possible for the attorney or the client to know in advance how difficult the problem will be.
In any type of fee arrangement, it is common for the attorney to require advance payment of some fees and expenses. This is sometimes called a "retainer."
Factors that determine lawyers' fees. Legal matters differ widely. No two situations are exactly alike. A lawyer's fee will depend upon a variety of factors. The Rules of Professional Conduct, which govern the conduct of lawyers, provide guidelines to be considered in setting legal fees. Among these are:
The time and effort involved
Unusualness of the case and the skill needed to conduct it
Results obtained for the client
Whether the matter is contingent on recovery
Customary charges of other lawyers for similar services
Whether the client is a regular one.
The Rules of Professional Conduct also point out to lawyers that the legal profession is a branch of the administration of justice and not a mere money-making trade.
In certain types of cases, attorneys' fees and sometimes costs may be imposed by statute or awarded by a court when the party is successful. Such are likely to be certain wage claim cases or civil rights cases (under the Equal Employment Opportunity Act or the Americans with Disabilities Act).
With these points in mind, how does a lawyer set a fee? In actual practice the attorney will weigh these factors:
Time and Effort. Most lawyers keep accurate records of the time they and other lawyers and the office staff spend on your case. Different attorneys value their time at different rates because of variations in their experience, special knowledge, and skill. There is, however, a degree of uniformity based on what other lawyers in the community charge.
Ability, Experience, Reputation. Of course, the ability, experience, and reputation of the attorney you choose are going to have something to do with the fee you expect to pay. If your lawyer has built a reputation as an expert or a specialist in some particular field of law, the attorney may charge more than someone with less experience who is not so well known.
Results. The results obtained are a factor in setting a fair fee. Since no lawyer can guarantee results in a contested matter, an attorney will expect to be paid whether you win or lose, unless the case is taken on a contingent fee basis. This is generally done in cases involving personal injury or damages. Under this arrangement, the lawyer takes a percentage of the recovery, if the attorney wins. If the case is lost, the lawyer is paid nothing for the work done. Of course, if a lawyer can be sure of being paid for the work done, the charge to the client could be less than if the case is taken on a contingent basis. Charges for legal fees often cannot be set in advance because the time and effort, the amount involved, the difficulty of solving the problems, and many other factors all must be taken into consideration.
Regular Clients. Your lawyer will likely take into consideration whether you are a regular client. Just as some businesses do, your lawyer may set a somewhat lower fee if you are a regular client. This is another of the many good reasons why you may want to have a "family" lawyer.
Other Considerations. As with any other professional service, an attorney must consider office expenses and overhead. An attorney's effort is supported by the efforts of a variety of others. The fee arrangement can include separate charges for secretarial, clerical and other assistance, or these services may be included in the fee charged by the attorney.
Types of cases
Accident Cases. Lawyers are prohibited from instigating or financing litigation. However, to avoid the old English system of making the lawyer available only to the rich, lawyers in the United States are permitted to accept employment in the handling of claims where their compensation will be paid only from the recovery made in the case. If there is no recovery, the lawyer gets no fee. The client, in any event, must pay the court costs and certain other expenses, such as those for expert witnesses. This fee arrangement, as previously mentioned, is called a "contingent fee." It is most commonly used in personal injury claims. Such fees range from 25% to 50%, depending on the nature and type of case involved. The percentage agreed upon usually depends on the probability and amount of recovery. No lawyer is required to accept a case on a contingent basis. This is a matter of agreement in each case between the lawyer and the prospective client. This agreement should be in writing and should be made at the time the lawyer agrees to handle the case. Both the client and the lawyer should have copies of the contingent fee contract.
Wills and Estate Planning. A client may want a simple will or may require a more comprehensive program of estate planning involving insurance, investment, home and business ownership, and various other complicated details. In either case the lawyer must make inquiry into the nature of the client's assets, personal and family situation, and individual desires. The amount of time that is required - and the lawyer's fee - is largely determined by the size of the estate and the complexity of the questions involved. In the simplest situation it would cost relatively little to have a will drawn by a lawyer. In other situations where the lawyer spends more time and effort working out a more complicated will or estate plan, the fee will be substantially higher. In either case, the benefits to be gained are well worth your investment.
Probating an Estate. When a person dies, with or without a will, who owns real estate or personal property, the estate may or may not have to be "probated." Maximum fees for the lawyer's service in these cases are set by Montana law and are based on a fixed percentage of the amount involved. A judge may allow additional fees in cases where extraordinary work and problems arise.
Dissolution of Marriage. The legal problems involved in dissolution of marriage proceedings vary greatly. In some cases they are relatively simple. In others they involve difficult legal problems having to do with child custody, financial settlements, the division of property, and many other factors that will seriously affect the future lives of a number of persons, even unborn children. The time and effort required of an attorney in a dissolution of marriage case and, of course, the fee, will therefore depend on many factors. Are there children to be provided for? What is the size of the estate? How is the property held? What are the tax problems? Accordingly, the fees will vary greatly. Many people who seek dissolution of marriage have no money to pay their attorney. In some cases, the court may order one party to pay the other party's attorney's fee. However, if the designated party does not pay the fee, this does not relieve the other party of the obligation for its payment.
Property Transactions. The purchase or sale of your home or other property may well be the largest single business transaction you will ever have. Therefore, it is important that you have the best legal advice before you sign an earnest money contract or any other form of agreement. You may have your attorney draft or review the documents involved in the sale, and attend the closing. Your attorney will always be willing to explain how the fee will be determined.
Advice and Counsel. When a lawyer charges for "advice" it does not mean an off-hand personal opinion. A lawyer's advice is a conclusion, based on years of training and experience, reached only after gathering and analyzing the facts and after hours or days of research and study of the law. Such advice and counsel is usually charged for on an hourly basis. Conclusion. It is important that you be comfortable in your relationship with your attorney. This means not only that you respect the attorney's competence and integrity, but that you understand and agree to the fee charged for the service. If you do not understand before a service is performed how the fee will be determined, be sure to ask for more explanation. After a service has been performed, your attorney will want you to be satisfied with both the service performed and the fee. If you have any questions about the amount of your attorney's fee, contact the attorney and ask for an explanation.
Conclusion. It is important that you be comfortable in your relationship with your attorney. This means not only that you respect the attorney's competence and integrity, but that you understand and agree to the fee charged for the service. If you do not understand before a service is performed how the fee will be determined, ask for more explanation. After a service is performed, your attorney will want you to be satisfied with both the service performed and the fee. If you have any questions about your attorney's fee, contact the attorney and ask for an explanation.
Last updated January 2003
This information is intended to inform you about Montana law generally. It is not intended as advice. You are encouraged to speak to an attorney regarding the specifics of your situation.
Lawyer Referral & Information Service. If you need legal assistance and do not know an attorney, call the Montana Lawyer Referral & Information Service. You will be referred to a lawyer appropriate to your location and problem. Call 406-449-6577.
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