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Start: Tony Wilson

How legal fees work Add to ...

Ahhh legal fees. Its amazing how this issue often spoils the relationship between lawyers and clients, creates fodder for late-night comedians, yet has vastly improved the standing and reputation of sharks in our oceans. So let’s talk about legal fees, so you have a basic understanding of what’s charged, why it’s charged and what you can do if you don’t like what’s charged.

Let me say at the outset, I, like most other members of the legal profession are biased when it comes to legal fees. We like them. We charge them. And we collect them.

Why? Because you charge for what you sell. So do we. Like you, if we don’t charge legal fees, we couldn’t afford to pay the rent to our landlords, the salaries to our employees, our payroll and other taxes, our computer, copier, and technology leases, our utilities bills, our lines of credit and the numerous other costs and charges that every business - no matter what it sells - has to pay to stay alive. And we wouldn’t be able to pay our own mortgages and all that we want to do with our personal income, given the many, many, many years we spent toiling in University and Law School without one.

Like it or not, as much as it’s a profession, law is also a “business” and if businesses don’t earn a profit, they wont be in business very long. Numerous legal decisions through the years have allowed us to charge a “fair fee” for our services. But when the best and brightest new lawyers one year out of law school are demanding (and getting) somewhere near $100,000 per year in Vancouver and Toronto, “fair” won’t always mean “cheap”.

Lawyers can charge fees in a few ways. Motor vehicle accidents and some other insurance claims are often done on a contingency fee basis, where the lawyer’s fee is a percentage of the monetary award paid at the end of the day, although this is rarely done by business lawyers or those doing commercial litigation. But you never know. Maybe a particular lawyer may consider a contingency fee arrangement for a commercial law matter in a particular situation.

Some things lend themselves well to “flat fees”, like simple incorporations, simple wills and simple real estate conveyances, although if the job becomes more complicated than “simple,” the hourly rate may apply. But ask your lawyer about flat fees. All they can say is no. Or yes.

Normally, legal fees are charged on an hourly rate that reflects the lawyer’s years practicing at the Bar; a more senior lawyer charging more than a junior one because the former has more experience. The lawyer will input the time he or she took to do certain functions in tenths of an hour, so if a telephone call about a matter (excluding pleasantries) was 12 minutes long, that should be recorded as a point 2 and multiplied by the lawyer’s hourly rate. If a letter to opposing counsel took 30 minutes to draft, that should be recorded as a point 5 times the lawyer’s hourly rate. And so on.

Legal work in larger offices should be done by a person in the office whose hourly rate is the most appropriate and efficient for the function. A paralegal, junior lawyer or articling student with lower rates may well be able to deal with certain functions less expensively for the client than the senior lawyer with a higher hourly rate (i.e. legal research by an articling student; a court application by the junior etc.). So canvas this issue with the law firm you want to use as the lawyer you’re dealing with may be too expensive for you, but others in the office may be billed out at just the right rate.

I’m always asked, “how much do you charge per hour?” for what I do, but when you think about it, this is often the wrong question to ask a lawyer. Hourly rates are part of the equation of what a legal bill will be, but they aren’t the only part of the equation.

It’s often hard for the lawyer to judge at the “get-go”, what the final bill will be for a particular legal function until the job ends because of uncertainty beyond the lawyer’s control. This applies to what litigation lawyers do as much (or more) as it applies to what business lawyers do. It always depends.

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