How are fees determined?
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UPDATED: Jul 16, 2021
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Clients and lawyers usually may work out any fee arrangement that they wish, so long as the fee the client will pay is “not excessive or unconscionable.”
Typically there are 5 basic types of fee structure. Sometimes these are used in combination.
Flat fee, based on the type of legal matter. Such as a simple Will $X, or to defend you in a drunk driving arrest through trial, $Y. The lawyer is basing the fee on his or her experience as to how much time and effort and skill is usual in the type of matter. Also, many clients prefer a fixed fee arrangement. Sometimes there is a provision that the fixed fee may be time based.
Time based, typically using the number of hours devoted to your matter multiplied by the lawyer’s (and sometime staff’s) hourly charges. This is the basis often used in business matters, such as negotiating the purchase or sale of a business, or defending a patent against attack.
A “contingency fee”, which is based on a percentage of the monetary recovery the lawyer ultimately obtains for you as a result of negotiation or trial. This is the basis on which most accident and personal injury cases are handled. A contingency fee enables you to retain a lawyer who will work hard for you even though you do not have the money to advance.
Statutory fees. In some matters the prevailing fee is actually or essentially set by law. For example, lawyers in Social Security Disability cases may charge no more than 25% of the recovery or $4,000, whichever is less; few lawyers could afford to handle a case for anything lower.
Asset-based fees. In many types of matters the amount of money involved is critical in determining the legal fee. For example, in residential real estate contracts and closings the price of the house often is the key basis for the fee. The fee on a $1 million home will be several times that of a $100,000 home even though the work is typically not several times greater, because the exposure is 10 times greater. Similarly in probate matters fees often depend on the amount of the assets in the probate estate.
For an explanation of legal fees involved in divorce, click here.