Solicitors Costs – What you need to know!
This page is written to help anybody seeking to understand about Solicitors costs. It’s a warts and all guide written by a Solicitor to help people to understand how Solicitor’s costs work – what the pitfalls are and how to avoid paying a large bill. It is primarily a guide for people trying to understand the complexities of No Win/No Fee Agreements, but it is hoped that this will be a useful guide to anybody thinking about employing a solicitor.
PAPER AND PAINT
At The Claims Partnership, we often use the comparison of employing a Painter and Decorator, when explaining how Solicitors costs work.
After finishing decorating your house, a Painter and Decorator will usually present you with a bill which is broken down into two parts. The first part usually describes the number of hours (or labour), the Painter has spent working on your home, for example 8 hours @ £25 per hour will give you a bill of £200.
The next section of the Painters Bill includes the cost of the wallpaper and paint which the Painter has used to decorate your house. At the end of the Bill, the labour and materials are added together to make the final bill.
Labour
Solicitors costs work in the same way. Solicitors also charge by the hour, but break their Bill into units of 1/10 of every hour or six minutes of work. A solicitor charging you £200.00 per hour will charge you £20 for each six minutes of work.
Solicitors rates vary from £50 per hour or so for Legal Aid work, to over £500 per hour for work done on high value commercial matters by City Law firms. All solicitors are required to spell out clearly what their hourly rate is and to obtain your agreement to pay that hourly rate, before they start working for you.
If you have received a Bill from a Solicitor for an hourly rate which you were not informed about, or have not agreed to, then you can challenge this. If you are not satisfied by the explanation from your solicitor, then you should take the matter to the Legal Ombudsman who has the power to ensure your bill is a fair one, or even cancel the bill. It is worth knowing that if your Solicitor has not properly advised you of their charges and obtained your agreement to them, then the chances are they cannot charge you at all.
Materials
Turning to the paper and paint, Solicitors spend money on what they call disbursements. These disbursement costs are the same as the paper and paint that your decorator will charge you for. They vary according to the type of case. In a personal injury claim for example, your solicitor will often have to pay for your medical records, for a medical report from a Doctor, as well as court fees and sometimes barristers fees.
If your solicitor is helping you to sell or buy a house, then these costs will include expenses such as property searches and registration fees at the Land Registry. A word of warning if your Solicitor seeks to charge you for bank transferring your final purchase monies. Very few solicitors firms actually pay their banks for this service and often include a charge for this. If your solicitor has quoted you for a money transfer fee, query this with them before you agree to instruct them – ask them what the cost is to them from their bank.
FIXED SOLICITOR FEES
Some solicitors agree to work on a fixed fee. This usually applies to routine work such as drafting wills, simple divorces and house conveyancing. If your solicitor has offered you a fixed fee and you have agreed to this, then your Solicitor is bound by this and cannot charge you any more. However, the devil is sometimes in the detail of the disbursements. Make sure you check these thoroughly and compare them with quotations from other Solicitors before instructing a Solicitor. It is not uncommon for the Solicitor who advertise the lowest fixed fee rate to make the highest charges for disbursements and produce the highest bill!
NO WIN NO FEE AGREEMENTS
Turning now to what we know as No Win/No Fee Agreements, but which are known formally as Conditional Fee Agreements. These are popular with both Solicitors and clients, because generally speaking, they do what they say on the tin. However, there are potential pitfalls and it is important that clients know what they are. Taking you back to our example of a Painter and Decorator, a No Win/No Fee Agreements only relates to the time spent by your solicitor in working on your case. They do not apply to the paper and paint, or the solicitors disbursements or running costs. It is important that you understand that under a No Win/No Fee Agreement, you as the client are responsible for the costs of the paper and paint, or medical records and property search fees. This is as much of a problem for Solicitors, as it is for their clients, since most Solicitors want the flexibility to obtain evidence, pay Barristers and to sue their client’s opponents, without having to worry about how to pay for disbursements.
Insurance
Most Solicitors get round this problem by obtaining a No Win/No Fee insurance policy. These are known as ATE or After The Event insurance policies. The premium or cost of the policy only becomes due on the day that your compensation payment is made to you and is not chargeable at all if your claim is lost. If your Solicitor offers you an ATE insurance policy, you should check that this includes not only the expenses in your case, but any legal costs that you might be ordered to pay to the other side.
If you have your own legal expenses insurance, you should be able to use this insurance to cover these costs under your own policy. Your Home Insurance policy might also include Legal Expenses and is worth checking. A word of warning however: Your Legal Expenses Insurer will often try to insist that you use one of their own solicitor or panel firms. They have no right to do this and more often than not are simply looking to sell the rights to administer your claim, particularly if you have been involved in a personal injury accident. This can be a problem, since a firm of solicitors who has had to pay a large fee to run a claim have less resources to devote to running the case. This frequently means they use non-skilled or semi-qualified lawyers in order to run the claim and still make a profit. You should be especially alert to this situation when your car insurer tries to appoint its own solicitor firm to run your claim when you have been involved in at no fault car accident.
If your solicitor advises you that they will arrange an ATE insurance policy for you, then it is very important from the outset that you understand who will pay for the insurance policy at the end of your claim, if it is successful. The cost of an ATE insurance policies can be expensive and can cause a serious dent in your compensation, if you are required to pay for the policy out of your damages.
COMMON NO WIN/NO FEE QUESTIONS ANSWERED
What happens if I win my claim?
With a No Win/No Fee agreement, your solicitor will only get paid if they win. In most cases, your solicitor will be paid a contribution towards their costs by the losing party. This is usually a relatively small amount. For example, in most road traffic accident, your solicitor will receive £500 from the other drivers insurance company if they successfully win your claim.
Solicitors charge a success fee, or a percentage of your compensation to cover their extra costs. In most cases, this is 25%. However, this percentage does not always apply to the total amount of your compensation. If you receive compensation for what is known as Future Losses, such as for physiotherapy or medical treatment that you have not had yet, or a loss of wages that you might suffer in the future, then your Solicitor is not entitled to take any portion of this compensation.
You should also check whether the percentage of compensation that your solicitor intends to take out of your compensation is inclusive or exclusive of VAT.
Most importantly, you should check whether the cost of any insurance policy is included within the Solicitors Success Fee. If possible, ask your solicitor to give you a guarantee of the minimum amount of compensation that you will receive out of your damages at the end of your claim.
It is also worth checking how your solicitor intends to pay for these disbursements as your claim progresses. Some expenses such as the cost of medical records and court fees have to be paid straight away. The vast majority of Solicitors firms pay for these expenses themselves and look to recover them from either the losing Defendant or the insurance company at the end of your case, but it is important to check.
If my agreement is no win no fee, why does my solicitor include an hourly rate in my agreements?
Solicitors have to include an hourly rate within their documents and agreements with you. Most solicitors include a high hourly rates which are frequently above £200 per hour. They do this because in some circumstances, the Court might order that the Defendants pay their costs on an hourly basis. These cases are not very common, but it can happen where your claim is a high value claim, where it is particularly complicated, or if the Court finds that the Defendant has behaved unethically. A Solicitor cannot charge you these high hourly rates, but have to stick to their agreement to take a fixed percentage out of the compensation you receive.
Is there anything that can go wrong?
Yes. Virtually all No Win/No Fee Agreements include clauses which require their clients to behave honestly, to attend medical appointments, to go Court and to give the Solicitor the help and assistance they need to win your claim. If your claim is lost because it is found that your claim is fraudulent or because you failed to attend court or a medical appointment, then your Solicitor has a right to cancel the No Win/No Fee Agreement and charge you by the hour for their labour the work that they have done, at the rate included within the No Win/No Fee Agreement – which is usually more than £200 per hour!
This can even happen if the Court finds that your claim is a genuine one, but that you have exaggerated your injuries or your financial losses. It is very important that you communicate with your solicitor and are open and honest with them. Do not be tempted to exaggerate your injuries or your financial losses!