What Is a Retainer Fee: Everything You Need to Know
A retainer fee is most commonly paid to individual third parties who have been engaged by the payer to perform specific actions on his or her behalf. 3 min read
What is a retainer fee? A retainer fee is an upfront cost incurred by an individual in order to pay for the services of a consultant, freelancer, lawyer, or another professional. A retainer fee is most commonly paid to individual third parties who have been engaged by the payer to perform specific actions on his or her behalf.
The Basics of Attorney Retainer Fees
A retainer fee is similar to a down payment and allows your lawyer to draw funds for various expenses. This is common for cases that involve numerous court appearances and document filings. Usually, the money is placed in a designated business account. This guarantees that the money is only used for the lawyer's fee and expenses related to the client.
The attorney will provide a written retainer agreement that explains how you will be charged and what happens if your retainer fee runs out before the end of the case. Most experienced attorneys are good at estimating the amount of time they'll have to spend on a case and charge a suitable retainer fee up front.
Be cautious of nonrefundable retainer fees. You have a right to terminate representation at any time and for any reason. The unused portion of your retainer fee should be refunded to you if you no longer want the lawyer to represent you. If you see the word "nonrefundable" in a retainer agreement, find out exactly what that means.
Why Pay a Retainer Fee?
Some clients pay a retainer fee for peace of mind. Retainer fees help to establish the attorney-client relationship. Fees are more predictable too. The contract states the amount of money to be paid and how it can be used. Other forms of fee arrangements, like a contingency fee, are usually dependent on the result of the case rather than a pre-set arrangement.
By paying a retainer fee, you are securing the attorney for the use of his or her name, reputation, and expertise. Sometimes the attorney's name gains leverage for the client and helps the case settle faster. It may only take a phone call or a letter to reach a settlement. Paying the retainer fee can save you money in the long run, with the right attorney.
A retainer fee pays the attorney for agreeing to be on standby for you. It compensates them for the loss of other potential income even when not actively working on your case. The retainer fee also defrays costs as the attorney performs necessary work on the file. It guarantees that the attorney receives payment for their time and efforts throughout the case.
What Are the Most Common Practices for Retainer Fees?
The retainer fee is usually based on a calculation of the attorney's hourly rates and the number of hours the attorney reasonably believes will be required for the case. Once the attorney starts working for you, their hourly fee is added on to the retainer fee, which is just a deposit. However, your attorney may be willing to take payment from the retainer fee until the balance reaches zero. Then the attorney will shift to standard hourly billing or request another deposit.
How Are Prepaid Legal Plans Different From Retainer Fees?
Prepaid legal plans are comparable to a retainer fee. They are like an HMO, where some basic services are included for a monthly fee. Prices range from $10 per month to $70 and up. Services are packaged together. For example, you may get unlimited phone consultation with a lawyer, a review of three contracts per month, and up to 10 debt collection letters per month. Discounts on other legal services are also included.
Factors to consider in prepaid legal services:
- What's included? Does the plan include the services you need? The number of services offered at a reduced rate may be limited. Know the fees for the services that are not included in the prepaid package.
- Decide if speaking to a different attorney each time you call will meet your needs. Is it more important to build a working relationship with just one lawyer?
- Do your homework. Ask other business owners who have experience with these types of services for references. Find out how conflicts of interest are handled if there is a dispute between two of their clients.
If you need help deciding whether a retainer fee is right for you, post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.