If you’ve never hired a lawyer before, you’re probably wondering what you can expect when you show up for your first appointment. Well, the experience will vary from office to office—and even among lawyers in the same office. For the truth is, lawyers are quite independent in the way they run their businesses. Unlike physicians, for example, who have insurance companies and the government monitoring virtually every move, lawyers are free from heavy-handed regulation. As a result, many choose to avoid bureaucratic paperwork, which they regard as a time-consuming nuisance.
Old-fashioned as it may seem, the simple handshake is still widely regarded as an -acceptable basis for establishing a lawyer-client relationship. But not everyone is so casual—at the other end of the spectrum, where the interaction between you and your lawyer is more formal, you may find yourself handed multiple pieces of paper, such as:
- a client information form, which asks for details on your business, your finances, and who (if anyone) referred you to the lawyer’s office
- a brochure describing the law practice and the education and experience of the firm’s lawyers, and
- a “retention letter” or a contract, detailing the lawyer’s billing practices and describing the extent of the work the lawyer will do for you. In some states, lawyers must present you with a retention letter or contract.
If the lawyer you’ve chosen has dispensed with these formalities, you may not care very much—after all, what does it matter where the lawyer went to law school? But do not let matters proceed until you have raised the issue of fees—and received clear, preferably written responses. Unless you do, you may not know what your lawyer is costing until you receive an unpleasant -surprise in the mail.
Common Fee Arrangements
If your lawyer assures you that you’ll be well taken care of but tells you very little about the specifics of how you’ll pay for the service, ask for some information about fees during your first visit. Most lawyers who advise small business clients about a lease use one of the following two fee arrangements.
Paying By the Hour
Paying your lawyer by the hour is the most common method. In most parts of the United States, you can get competent services for your small business for $150 to $250 an hour. Most lawyers bill in six-, ten-, or 15-minute increments. Understand that these are the smallest “chunks” of time that the lawyer will bill for, even if a given task actually took less time. For example, a lawyer who bills in six-minute increments will charge you for the full six minutes even though a particular phone call lasted only two.
If you are concerned about runaway hourly costs, you can ask the lawyer to agree to a “cap,” or an upper billing amount. This means that when the cap has been reached (or is near), the billing will stop (and the lawyer will stop working) until you authorize more work. You might have to do so if you run into an unusual snag that requires many more hours of legal services than either of you anticipated. For example, if a complex environmental issue pops up during negotiations—involving asbestos in your building or an underground storage tank beneath it—your lawyer may reasonably expect payment over and above the cap.
If your lawyer will be delegating some work to a less experienced associate, paralegal, or secretary, the delegated work should be billed at a lower hourly rate. Your fee arrangement should specify the rates for associates and paralegals if they will be in the picture.
Paying a Flat Fee
Sometimes a lawyer will quote you a flat fee for a specific job—for example, the lawyer may offer to review your commercial lease for $450. In a flat fee agreement, you pay the same amount regardless of how much time the lawyer spends on the particular job.
When an attorney is highly recommended by others and the flat fee is moderate, this can be a great arrangement for you. But if the assignment is open-ended—for example, it might involve extensive negotiations or a lot of redrafting—a lawyer won’t agree to work for a fixed amount. Merely reviewing a lease is one thing—negotiating and drafting is quite another.
To secure a flat fee or cap, dangle the prospect of more work ahead. Explain to the lawyer that yours is a small business with a limited budget. Especially if you’re just starting out, mention that you’ll have other legal needs in the future if your business succeeds. The possibility of more lucrative work in the future may persuade the lawyer to offer an attractive fee arrangement with you now.
Paying the Lawyer’s “Costs”
Lawyers may charge you for more than just the value of their services. Typically, lawyers charge clients for costs that are not included in the lawyer’s normal office overhead, such as travel, hiring experts, time spent on online legal research databases, or other consultants—and some even charge for photocopying! Be sure to find out whether you will be charged for itemized costs and, if so, what they are and how much you’ll pay.
Get Your Understanding in Writing
Your lawyer should be completely forthcoming with answers to your questions about how you’ll be billed, and for what. It’s a good idea to ask that these answers be written in a letter or contract (as mentioned above, this is required by law in many states). An old-school lawyer may take your request as a slight breach of etiquette, but don’t let that stand in your way.
This article was excerpted from Negotiate the Best Lease for Your Business by Janet Portman