What Does It Mean To Have a Lawyer on Retainer?

You may have heard of people having an attorney on retainer. Small-business owners and some individuals pay attorneys a small fee regularly, so the attorney is available when needed. That is one way of having an attorney on retainer.

A retainer agreement is useful for small businesses that need regular legal work but do not need a full-time attorney on staff. A company that is regularly audited or turns in documents for regulatory compliance each quarter may need an attorney on standby to ensure you do everything right.

There are different kinds of retainers. Not everyone needs an attorney at their beck and call. Read on to learn more about retainers and retainer fees and when you might need an attorney on call.

Types of Retainer Fees

Retainers are fees paid in advance for legal services. The fee agreement and fee are slightly different depending on why you hire the attorney.

• A general retainer is an arrangement for a period of time. You pay for the attorney's time in advance so they can answer legal questions and assist when needed. The American Bar Association (ABA) discourages this type of retainer since the attorney is being paid for work not yet done.
• A special retainer is a flat fee paid for a specific legal issue. Current ABA guidance states that any flat fee arrangement must refund unused funds at the end of the case.
• A retaining fee or advance payment is like a down payment when you first hire an attorney for your case. The attorney places this amount of money into the client's trust fund and withdraws money from that amount until it is gone. Then, they bill the client at their regular hourly rate.

The ABA recently issued an ethics opinion (Formal Opinion 505) reminding attorneys and clients that advance fees cannot be nonrefundable. The opinion says that a general retainer is "compensation for the lawyer's promise of availability … (and) is not an advance deposit against future legal services." In other words, a general retainer is a payment so that the attorney will set time aside for the client. It is not prepayment for any legal services.

What To Consider Before Hiring an Attorney on Retainer

Most people and small businesses do not need an attorney on retainer. Even if your business is regularly audited or reviewed for regulatory compliance, the cost of periodic attorney fees is probably less than that of monthly retainer fees.

On the other hand, if you need regular contract or real estate transaction reviews and need a lawyer's services every week for legal advice, having a good attorney-client relationship is essential. In these cases, having a retainer may be a sound business investment.

Ask yourself:

• What will you use the attorney for? Most people only need an attorney once every few years. If this is true for you, having an attorney on retainer may not be a financially sound decision. 
• Check your insurance policies. Most insurance policies, including auto and homeowner's insurance, will pay for an attorney should you be involved in an accident. If this is so, there is no need to pay an attorney as additional insurance against these lawsuits.
• Check your employee benefits. If you are an employee of a large company or a member of a union, a lawyer on call may be part of your benefits. These attorneys can handle most routine legal matters, such as wills and real estate transactions, as well as certain lawsuits. Paying another lawyer on retainer when you already have one through your employer usually does not make financial sense.
  

Again, don't be confused by the terms "retainer" or "retainer agreement." Generally, these are not the same as having a lawyer "on retainer." When you “retain" a lawyer, that simply means that you are hiring them, and the money you paid to the attorney is known as “the retainer." The agreement signed when someone hires an attorney is called the retainer agreement.

When You Retain an Attorney: Your Retainer Agreement

When you hire an attorney for a legal matter, you typically pay a set fee upfront. Although some people call it a retainer, it is more properly called an advance. After your first visit, the attorney places the advance payment in the client's trust account and deducts all legal fees and court costs from that sum. They will bill you at their standard rate when the money is gone.

Your legal representation agreement should detail the billing process, including:

• The attorney's hourly fees
• Filing fees and court costs
• Associate and paralegal hours, if billed separately
• Estimated number of hours spent on the case
• Additional costs such as copies, postage, e-filing, etc.

Cases taken on a contingency fee basis, such as personal injury cases, may still require an advance payment. Depending on the fee arrangement, the attorney may bill the client for fees and costs or deduct them from the final award. Be sure to clarify all these issues in the contingency fee agreement.

Getting Legal Help

No matter your legal situation, having an attorney before you need one is best. The type of case determines the attorney you need, so the first place to start is a good attorney referral service. FindLaw's Find a Lawyer service can point you in the right direction.