Before you hire an attorney to represent your business, it is important that you understand how attorneys are paid and what retainer agreements look like.
We’ll first look at how to pay an attorney. Then we’ll see how a retainer works.
There are many ways to pay an attorney
The type of case you are dealing with and the length of your relationship will determine how much you pay your attorney.
The fees that attorneys charge are determined by a variety of factors. These include the amount of work required and the complexity of your case. The following factors will determine the fee amount:
- Based on the level of each professional (partner, associate, paralegal) and their experience, these rates will be calculated for you.
- Complexity and novelty of the issues
- The difficulty of the problems encountered
- The scope of the responsibility
- The final result was
- The efficiency of the work and standard fees for similar legal services.
These are the most popular pay arrangements:
Contingency fees. If the case is in your favor, the lawyer receives a portion of the amount you receive. Your attorney will not be paid if the case is lost. However, they could still charge fees for their services. The percentage of the contingency fee is negotiable.
Flat fee. This fee can be used to complete one-time tasks such as creating a will or filing for bankruptcy.
Hourly rates. Some lawyers charge an hourly fee. While an experienced lawyer might charge more per hour, they may be able to complete the task faster. Before you sign any agreement, make sure to receive a written estimate of the hours.
Retainer. A retainer is a down payment for expenses and fees. 2
How retainers work
A retainer is a payment in advance for legal services to be rendered. A retainer can be discussed with an attorney in one of three ways:
General retainers are fees that are paid for a set period of time and not for a particular project. The attorney is paid to be available during that time for questions and discussions about legal matters. You may need an employment attorney to assist you with employee issues.
A retainer fee is a lump sum or deposits you pay in advance. By law, the attorney must deposit this money in a trust account so that you can draw on it as the work is completed. You get the money back if there is any money in the trust account after the project ends.
A special retainer is a flat fee you pay to an attorney for a particular case or project. This type of retainer is prohibited in many states as it prevents you from releasing the attorney at the end of the project. 3
Here’s an example
Your lawyer might ask for a $5,000 retainer to help you with an issue. The attorney will keep track of each letter, every document researched and every 10 minutes spent on your case.
All charges and time are deducted from the retainer. The attorney should provide a monthly accounting, which will include the retainer amount, of all activities. Depending on the agreement, additional fees may be required if the charges exceed the retainer amount.
State laws on attorney fees
The state ethics rules and the state bar associations have rules for professional conduct. These rules include rules for settling disputes and ensuring that attorneys are charged reasonable fees. For more information, contact your state bar association.
What is included in a retainer agreement?
Before you sign a retainer agreement, make sure you review it with your attorney to ensure you understand the fees. Although there is no “typical” retainer agreement out there, some features are common to all.
- The compensation (what you will pay for the services), and how it is calculated. It is important to get a list listing the hourly rates of different levels of attorneys within the practice.
- How an attorney will use the retainer. The retainer will be held in trust by the attorney until fees are incurred. After that, they will use the retained amount to pay the fees. This description also includes information about when an attorney may request an additional retainer amount.
- Other costs should also be included. These charges are in addition to the retainer fees and include court costs, travel expenses, copying costs, and long-distance phone charges.
- Terms and frequency of billing. Usually, bills or statements are sent monthly. They show the cost for the month as well as the remaining retainer fee. Additional retainer amounts or costs are often due upon receipt. :
- How fees will be disputed. Each state has its own regulations that govern how fees are handled. Some states allow arbitration for these disputes.
If you don’t pay the retainer
What happens if I don’t pay the attorney? You might be charged a service fee, interest, or a lien for documents and other property that the attorney may have. You won’t be able to get your stuff back unless you pay the entire attorney’s bill. Your agreement should clearly state the right of your attorney to charge you for nonpayment.
How the Retainer Trust account Works
Your retainer fee must be deposited in trust accounts by attorneys. This is not the case for business accounts. As the case progresses, an attorney will transfer funds from this account to her business account on a regular basis. Usually, it is monthly. After your attorney has earned the money performing services for you, transfers will occur into her business account. Usually, this happens on a monthly basis.
Verify the work invoice
As the client, it is your responsibility to ensure that any transfers from the retainer are backed up by the amount of time spent on the case.
An update letter should be sent at least once per month to your attorney, or any other professional you are working with. An accounting statement detailing the work performed on your behalf and the charges against your retainer should be included in the letter. You should also include the total month and time that was billed for each contact or item.
Retainer arrangements offer many benefits
Both the client and attorney benefit from a retainer agreement. An attorney can rest assured that they will be paid on a monthly basis or at the very least, regularly. This is especially helpful for clients who are slow to pay.
A retainer agreement is beneficial to the client as it gives an estimate of legal fees. It is possible for your legal matter to “blow up”, which can require more time and effort depending on its nature.