Types of Legal Fees

The type of fee arrangement that you make with your lawyer will have a significant impact on how much you will pay for their services.

Legal fees depend on several factors, including:

• The amount of time spent on your problem
• The lawyer's ability, experience, and reputation
• The novelty and difficulty of the case
• The results obtained
• The costs involved
• Other factors, such as the lawyer's overhead expenses (rent, utilities, office equipment, computers, etc.)

The Most Common Fee Arrangements

Lawyers use several types of fee arrangements, depending on the type of case.

Consultation Fee

The lawyer you meet with may charge a fixed or hourly fee for your initial consultation. During this consultation, you both determine whether the lawyer can assist you. Some types of cases, like personal injury-related cases, have free consultations. Be sure to ask when you are making the appointment whether you will owe money.

Contingency Fee

When a lawyer charges for legal services on a contingency basis, it means they base their fee on a percentage of the amount awarded in the case. If you lose the case, the lawyer does not get a fee, but you may still have to pay some expenses. In these arrangements, make sure to find out whether the lawyer calculates the fee before or after expenses.

Contingency fee percentages vary. One-third of the total award is common. Some lawyers offer a sliding scale based on whether the case was settled or went to trial. Courts may limit the amount a lawyer can receive.

This type of fee arrangement is most common in personal injury cases, property damage cases, or other cases involving financial losses. Lawyers can't offer contingency fee arrangements in criminal cases, divorce cases, and child custody matters.

Flat Fee

A flat fee is when a lawyer charges a fee upfront for legal work. Lawyers offer flat fees for cases that are simple or routine, such as creating a will, getting an uncontested divorce, or resolving a traffic ticket. If you ask an attorney for general legal advice, such as a demand letter, you'll pay a flat fee for the service.

Flat fees can be part of an initial retainer fee. The attorney agrees to take a case for a flat fee and apply it to the full fee agreement if the case is more complex. Attorneys who don't offer free consultations often apply consultation fees to the written fee agreement in this manner.

Hourly Rate

An hourly rate case is when your lawyer charges you for each hour (or portion of an hour) that they work on your case. For example, if the lawyer's fee is $100 per hour and the lawyer works 5 hours, the fee will be $500. This is the most typical fee arrangement.

Some lawyers charge different fees for different types of work, like conducting legal research versus making court appearances. Large firms have different fee scales, with senior members receiving higher fees than associates or paralegals. You should ask the lawyer to estimate the amount of work they will need to put into your case.

Referral Fee

A lawyer who refers you to another lawyer may ask for a portion of the total fee you pay for the case. Some state codes of professional responsibility prohibit referral fees unless the arrangement meets certain criteria. Like other fees, the total fee must be reasonable, and you must agree to the arrangement. Your state or local bar association may have more information about the appropriateness of a referral fee.

Retainer Fee

A retainer is when you pay the lawyer a set fee, typically based on the lawyer's hourly rate. You can think of a retainer as a down payment for future legal costs. The law firm places the retainer in a trust account and deducts the cost of services from that account as they accrue. In this type of retainer, your attorney may ask for additional funds when the retainer falls below a set amount.

Retainer fees are nonrefundable unless a court deems the fee unreasonable. Some states do not allow nonrefundable retainer fees.

A retainer fee can also mean that the lawyer is on call to handle your legal problems over a set period. Since this type of fee arrangement can mean several different things, be sure to have the lawyer explain the retainer fee agreement in detail.

Statutory Fee

The fees, in some cases, are set by statute, or a court may set and approve a fee that you pay. These types of fees may appear in probate, bankruptcy, or other proceedings.

Additional Fees and Costs

With all types of fee arrangements, you should ask the lawyer what costs and other expenses the fee covers. There are many other costs that come with preparing and litigating legal matters. Additional fees and costs include:

• Staff hours, including secretaries, legal assistants, and paralegals
• Filing fees and court costs
• Expert witness fees
• Court reporter and deposition costs
• Postage, copies, and messenger fees

There are many ways to handle these fees. With an hourly fee agreement, your attorney may bill you separately. With a retainer agreement, the attorney deducts all expenses, including these additional fees, from the retainer. With a contingency agreement, the attorney may pay the fees and costs and then include them with the attorney fees at the end of the trial, or they may bill the client as the costs occur.