Attorney Fees and Costs: Everything You Need to Know
Attorney fees and costs are one of the biggest concerns when hiring legal representation.8 min read
Attorney Fees and Costs
Attorney fees and costs are one of the biggest concerns when hiring legal representation. Understanding how attorneys charge and determining what a good rate is can be confusing. Understanding some basics about the costs of legal representation and how attorney-client fee agreements are usually structured before speaking to an attorney will help you ask the right questions and determine whether the rate is acceptable.
The most common forms of attorney’s fees are hourly rate fees, flat rate fees, and contingency fees. The fees typically pay for the attorney’s time only. In addition to the fees, you may be required to pay costs associated with your legal representation like the cost of filing papers with the court or of sending correspondence to the opposing party. Sometimes attorneys require money down in the form of a retainer.
Types of Fee Agreements
Hourly Rate Legal Fees
Under an hourly rate agreement, the attorney gets paid a set hourly rate for their work.
Typical hourly rates range from $100 per hour in more rural areas to $300+ in more metropolitan areas. Attorneys that have extensive experience or education in a particular area will usually charge more than the average hourly rate to compensate for their specialized knowledge. The trade-off is that attorneys with more experience in an area can often complete the legal work more quickly so you won’t be billed for as much time. Some attorneys charge different amounts for different types of work, billing higher rates for more complex work and lower rates for easier tasks.
Attorneys usually bill in 1/10th of an hour increments, meaning you will be charged 1/10th of the hourly rate for every 6 minutes the attorney spends on your case. The most common billing frequency is monthly, however, some attorneys will send bills more frequently, others less frequently.
Hourly rates have traditionally been the most common legal fee arrangement. However, as technology changes and the practice of law evolves, it is more common to see “non-traditional” fee arrangements like flat-fee packages.
Flat Rate Legal Fees
Flat rate legal fees are when an attorney charges a flat rate for a set legal task. The fee is the same regardless of the number of hours spent or the outcome of the case. Flat rates are increasingly popular and more and more attorneys are willing to offer them to clients.
Attorneys are more willing to offer flat rates on well-defined tasks like basic contracts, uncontested divorce, and forming business entities. Flat rate legal fees are usually not an option for lawsuits and other more complex tasks that can quickly expand in scope. It is too risky for the attorney who could end up doing $10,000 worth of work for $1,000.
Be sure to ask whether the flat rate includes costs associated with the work or not. This is a common source of confusion on flat rate legal agreements.
Contingency Legal Fees
Contingency legal fees are based on success. Under the typical arrangement, if the attorney wins the case for the client, the attorney will take a percentage of the amount won, but if the attorney is not successful, the client pays nothing. Often, the percentage that the attorney receives depends on what stage the case settled at. For example, the attorney will usually obtain a smaller cut if a settlement was reached before trial – because less time and expense was expended – than if the case goes to trial. When contingency fees are used the fees and costs of the suit are often deducted from the monetary recovery before the percentage is taken.
Contingency fees are only utilized where there is a dispute, otherwise there would be no objective way to determine whether the attorney had been successful. Contingency fees are most commonly available in automobile accident cases, medical malpractice cases, and debt collection cases.
Although the percentages that a successful attorney receives, which can reach about 33% of the recovery from the dispute, seem high, contingency arrangements are often favorable for the client. The fee taken by the attorney is often less than the client would pay if they paid hourly. Contingency fee they remove the risk and allow the client to bring suit where they otherwise could not afford to do so.
Most states have laws that prohibit the use of contingency fees in certain types of cases, like divorce and criminal prosecutions, for public policy reasons.
How Rates are Calculated
Attorneys typically have great discretion in deciding on what their fees will be. In most states and under ethical rules governing attorneys, the fees only need to be “reasonable.” There is no black and white test for what is reasonable, instead a number of factors are considered. Factors considered in determining whether the fees are reasonable include:
- The attorney’s experience and education;
- The typical attorney fee in the area for the same services;
- The complexity of the case;
- The attorney’s reputation;
- The type of fee arrangement – whether it is fixed or contingent;
- The client or case’s time limitations; and
- The time and skill required to competently represent the client.
Clients should consider these same factors when deciding whether they will pay an attorney’s requested fee. For example, a client should expect to pay more if they request that an attorney step in to represent them in a legal action that requires a response within 3 days rather than 3 months.
Other Legal Costs & Expenses
In addition to the fees paid for the attorney’s work, clients may be responsible for other required fees and costs associated with their legal representation. Clients should always ask what costs and fees are included in their representation and which must be paid separately.
Some common legal fees and costs that are virtually inescapable include:
- Cost of serving a lawsuit on an opposing party;
- Cost of filing lawsuit with court;
- Cost of filing required paperwork, like articles forming a business, with the state;
- State or local licensing fees;
- Trademark or copyright filing fees; and
- Court report and space rental costs for depositions.
In most cases clients should expect to pay these types of mandatory fees and costs. In contingency fees, a client is usually only responsible for these costs if they are successful, in which case these costs are taken out of the amount of money recovered.
Clients may also be responsible for paying some of the attorney or law firm’s expenses including:
- Travel expenses like transportation, food, and lodging;
- Mail costs, particularly for packages sent return receipt requested, certified, etc;
- Administrative costs like the paralegal or secretary work.
Whether or not these types of operating expenses are included in fees or paid for separately by the client varies greatly. When in doubt, ask!
In movies, TV shows, and books, the term “retainer agreement” and the phrase having an attorney “on retainer” are thrown around regularly. However, many people, don’t actually know what a retainer agreement is and are often afraid to ask for fear of looking foolish.
A retainer agreement is an agreement under which the client agrees to pay the attorney a large sum up-front, usually ranging from $2,000 - $10,000 as essentially security for future payments. The retainer fee goes into a trust account and as the attorney earns it, it is taken out and placed in the attorney’s general operating account. For example, if an attorney billing at $100 per hour spends 5 hours on a case, the attorney will move the $500 he or she has earned from the trust account to the operating account.
The agreement may provide that if the amount in the trust account dips below a certain amount, the client must replenish it by putting more funds into the account. If there is money from the retainer fee remaining at the end of the representation, the attorney is required to refund that amount to the client.
Retainer agreements are typically used in two situations: (1) where an attorney expects to expend a fair amount of time on a case and wants to ensure payment; and (2) when a client wants to secure the ability to reach out to an attorney for ongoing legal services and advice.
Retainer agreements are usually only used in conjunction with hourly fee arrangements. They should not be confused with flat fee agreements that require advance payment of attorney fees and consider the fees earned upon receipt.
Legal Fee Contracts
Although not always required by law, clients should always request that agreements regarding legal fees be put into writing. A written contract prevents misunderstandings because the client has a chance to review what the attorney believes to be their agreement.
If the client does not agree with a term or does not understand a provision in the contract, they should not sign the agreement before seeking clarification from the attorney. Attorneys are human too and may make a mistake when drafting an agreement or might be willing to negotiate on a particular term to help find a happy medium. A written contract also provides evidence if there is ever a dispute between an attorney and a client.
Clients should always take their time to review, understand, and ask questions about the attorney fee agreement. Attorneys should never pressure clients to sign on the spot or sign an agreement without reviewing it. If this happens, clients should consider it a red flag and consider retaining a different attorney.
Legal Fee Disputes
As with any contract, disputes sometimes arise under legal fee agreements. A client may disagree with the amounts charged or an attorney may seek to collect money from a client that is past due on payments. The first step to resolving these disputes is communication. If there is a disagreement, clients and attorneys should first seek to discuss it and try to reach a mutually agreeable solution. Often, small disagreements balloon merely because both the attorney and the client avoided talking to the other out of fear.
When informal talks do not resolve the dispute, how legal disputes over fee agreements are resolved depends on what the terms of the legal fee contract say as well as state law. For example, many states offer an arbitration program that clients can opt into. The arbitration program provides a quicker, lower cost, fair way of resolving disputes between clients and attorneys.
Free or Low Cost Legal Services
When money is an issue, there are ways to obtain legal services at a cheaper rate. First, clients can simply ask an attorney for a discount or to limit their work to a certain number of hours. Not all attorneys will agree but a surprising number will, particularly for new clients.
Clients can also use services like Upcounsel that use technology to help attorneys keep their rates lower which in turn usually translates to lower fees for clients for the same legal services offered at more traditional law firms.
Clients can also research law firms and legal services offices, like the Legal Aid Society, that offer “pro bono,” meaning free legal services. Pro bono services are most frequently available to those who have very little money or assets for legal work that impacts important rights like domestic violence issues, discrimination issues, landlord-tenant issues. While financial impoverishment is often a prerequisite to obtaining pro bono services, occasionally, a law firm or legal service office will offer pro bono services based on the type of legal issue alone.
As a last resort option, individuals can always represent themselves and utilize free resources available at the local law library and through their local legal aid office to guide them. Of course, the self-represented individual is at a disadvantage compared to the person who hires attorney, but when it is the only option, it is possible.
Even with an understanding of how attorney-client fee agreements and attorney billing works, it can be difficult to find an attorney that is a fit for your needs. UpCounsel’s platform of top, experienced attorneys makes that easier. To get in touch with multiple attorneys in your area, post your legal need on Upcounsel and ask attorneys to apply or wait for the offers to roll-in.