Money Matters: Understanding Legal Fees

Clarity and transparency about legal fees is one of the most important ingredients for a successful lawyer-client relationship. Before entering into a retainer agreement with a lawyer, it is important to discuss with the lawyer how they bill for their services, what is included in their fee and what is excluded, and how you will pay for it.

How Lawyers Determine Fees

Most lawyers who offer legal services to the public are private practitioners. What this means is, whether the lawyer is practicing alone, in a small firm, or in a large firm, they are likely operating a for-profit business. Similar to other businesses, the lawyer will have start-up expenses (money spent to start the business) and operating expenses (expenses that must be paid monthly/annually to keep the business going). There are a number of other expenses that lawyers and other regulated professionals have to pay in order to maintain their license. These include liability insurance, licensing fees and continuing education expenses. Many new lawyers are graduating with a significant amount of student loans, due to drastic increases in law school tuition. This is another factor that is driving up the cost of legal services.

Each lawyer or law firm is responsible for setting their own fees. However, legal fees are usually based on the lawyer’s overhead expenses (both start-up expenses and operating expenses), the lawyer’s expertise and years of experience, and the market rate for legal services.

Canadian Lawyer Magazine publishes an annual survey of legal fees across Canada. It is a helpful tool for assessing a lawyer’s fees. The average hourly fee for a lawyer with my level of experience and areas of practice is currently $300 to $350. Click here for the complete 2018 legal fees survey.

The Billable Hour

Most lawyers and other legal service providers charge an hourly fee for legal services. Each hour is broken down into tenths and is billed in six-minute increments as follows:

Billable Time Actual Time
0.1 0 – 6 minutes
0.2 7 – 12 minutes
0.3 13 – 18 minutes
0.4 19 – 24 minutes
0.5 25 – 30 minutes
0.6 31 – 36 minutes
0.7 37 – 42 minutes
0.8 43-48 minutes
0.9 49-54 minutes
1.0 55-60 minutes

The lawyer or law firm bills for all time spent on the client’s matter, including drafting documents, doing research, corresponding with the client and third parties, attending meetings and court appearances, etc. The lawyer cannot bill for some other types of work that may be time-consuming and necessary to do the client’s work, but is considered “overhead”. This non-billable work, which includes administrative/clerical work, marketing and professional development, is built into the lawyer’s hourly fee.

While the billable hour is the most common way of billing for legal services, it has developed a bad reputation over the years among clients and lawyers alike. The client does not have certainty about how much their legal matter will cost and the lawyer does not have any certainty about how much income they will generate from a given file. For these reasons, some lawyers have moved towards flat fee and alternative billing arrangements for routine and predictable matters, such as drafting documents.

We have found the billable hour to be the fairest way to bill for our services. Litigation is complex, unpredictable and often driven by the conduct of the parties. By billing for our time, those clients who use more of our time pay more, while those who use less pay less. Additionally, we can only bill the client for the time spent on the client’s work and cannot bill for time spent on other clients or on personal matters.

**** Some civil litigation lawyers enter into contingency fee arrangements with clients. This means that the lawyer is only paid if the client recovers money. Contingency fee arrangements are NOT permitted for family or criminal law matters.

Disbursements

Legal fees are for the lawyer’s time. They do not include expenses that lawyer or law firm incur to do the client’s work. The expenses that the client must reimburse the lawyer for are called disbursements and are typically billed as a separate item on the client’s invoice.

Common disbursements include court filing fees, process server/courier fees, long distance calls, postage expenses, fees charged by third parties for letters or reports, photocopying/printing, and binding materials. If the lawyer is required to travel to do a client’s work, they may also bill the client for travel expenses, including mileage and parking.

It is important to discuss anticipated disbursements with the lawyer before signing the retainer agreement and throughout the lawyer-client relationship.

HST

Similar to other businesses, lawyers are required to both collect HST for their services and to pay HST for expenses.

Tips for minimizing your legal bill

Organization and Efficiency – each time a lawyer or law clerk touches your file – whether it is to read an email, answer a phone call or to organize and/or review documents – the billable clock starts anew. Multiple emails and phone calls, or sending information in a piecemeal fashion drives up your legal bill. The more efficient you are in providing information and communicating with us, the less time we will bill. Likewise, we strive to be organized and efficient by streamlining our processes, continually investing in technology and assigning work to the appropriate staff based on their expertise and skills (i.e. law clerks do law clerk work and lawyers do lawyer work).

Reasonableness – your lawyer has an obligation to be honest with you about your matter and to provide you with the best legal advice based on their knowledge of the law and your circumstances. What you do with that legal advice is up to you. In my experience, clients who follow their lawyer’s legal advice typically end up spending an appropriate amount on their legal fees. Clients who choose not to follow their lawyer’s advice, take unreasonable positions, or take positions that are not supported by the law and their circumstances typically end up paying higher legal fees due to the additional time spent trying to achieve their desired outcome.

 

The Eglinton West Law Office provides legal services in child protection, family and criminal law to clients across the GTA. Please contact us by phone: 416-554-1411 or email: info@eglintonwestlaw.ca to learn more about how we can assist you with your legal matter.  

By: Renatta Austin, September 9, 2018

 

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