Typical Client/Lawyer Legal Fee Arrangements

Knowing the ins and outs of your fee arrangement with your lawyer is extremely important. It can help prevent surprises and save you a great deal of aggravation down the road. It's helpful to research the background of a lawyer before you engage the services of one. However, understanding the basic structure of most legal pay agreements can also help you understand the arrangement into which you're about to enter.

There are four basic legal fee categories: retainers, flat fees, hourly billing rates, and contingent fees.

The right structure for your situation depends on the legal market in your area, your lawyer´s reputation and experience, and your specific matter or case. Be aware that almost everything concerning fees is subject to negotiation.

Retainers
A retainer is most often a lump sum payment to an attorney, made in advance of any work performed on your behalf. Attorneys who use retainers often request a specific amount before starting work; that amount is generally negotiable. The attorney then deducts fees and costs from the retainer as they accrue during the course of the representation. Don't be surprised how quickly you can run through even a substantial retainer. And if you change lawyers during the course of your representation, you may not be able to recoup any unused portion of the retainer.

Flat Fees
This arrangement is typically used for simple, well-defined matters such as preparing a will, a simple bankruptcy filing, or an uncontested divorce. The lawyer generally knows how much time and resources the task will require. In general, flat fee arrangements benefit the client because fees are capped. Depending on the circumstances, you may be able to negotiate flat fees for more complicated matters.

Hourly Billing Rates
An hourly billing rate is a predetermined amount of money that attorneys charge for time spent on a particular matter. The ultimate amount of your bill depends on how much time your attorney spends working on your case. Hourly rates vary depending on the legal market and your attorney's level of expertise. Expect to pay anywhere from less than $100 to more than $500 per hour for an extremely experienced or high-profile attorney. Be aware, though, that a higher hourly rate doesn't always equal higher-quality work. If you're unsure, feel free to question the amount of time an attorney spends on a particular aspect of your case. Even in hourly arrangements, you may want to ask for an estimate of how much the bill is likely to be.

Contingency Fees
Contingency fees most often are used in litigation by plaintiffs' attorneys. They let potential plaintiffs retain an attorney they otherwise could not afford. The attorney takes a percentage of any settlement or recovery. Contingency fees are typically one-third of the recovery, sometimes more if the attorney must try the case. Clients do not pay a contingency fee unless or until they win money damages.

Keeping Track of Fees
Many states require that fee agreements be in writing. Make sure you get a written agreement, and don't use an attorney who is unwilling to provide you with one. Additionally, if the attorney doesn't already do this, ask to receive regular (for example, monthly) statements itemizing all charges you're expected to pay. You can also ask your lawyer to get approval before accruing more than an agreed amount in fees and costs. If you´re an especially good negotiator, you might even be able to arrange a ceiling or limit on fees.

For guidance on how to research an attorney to help with business concerns, read Where Can I Find a Business Lawyer?