People can find paying a lawyer hard to understand, as there can be a number of fee options. With the new businesses entering into the legal market, the option on fees is likely to increase.
Traditionally we work on an “hourly rate” basis, whereby the solicitor will have a specific set hourly rate, usually based on their skill and experience. Then for each hour or part of the hour that they work, they charge their hourly rate. Most commonly they charge 10 units per hour, so for every 6 minutes or part thereof.
We can then work on a “fixed fee” basis, so before we start we agree a fee and unless something that we have excluded takes place, then the fee is known and agreed beforehand. There is commonly a small element built into the fee to take account of any contingency, so that if a big contingency takes place, the likelihood is that the solicitor will lose, but if no contingency takes place, then the client will lose. And if a small contingency takes place, then the fees are probably about right. The margins built in are small, so there are never usually significant winners or losers.
We can then work on a “conditional fee agreement” or CFA, otherwise known as a “no win no fee” basis. This kind of agreement is relevant when the matter is being litigated and on litigation, the general rule is that the loser pays the winners costs. A long time ago one of my undergraduate lecturers said that if you know the answer to the question, you don’t litigate it and I’ve always remembered that. Litigation is therefore an arena to deal with an issue where the answer is not clear and therefore each party runs the risk of losing and having to pay the others costs. The answer to this is usually insurance; the price of the policy can be passed onto the loser or sometimes the claimant will have to pay a small premium. The concept of conditional fee agreements is that if your client loses, the lawyer gets no fees, but if your client wins, then you get a percentage uplift on your fees up to 100%, but it is based on the hourly rate system. So effectively for every hour that you work, you can be paid for up to 2 hours work. It is very profitable for the cases you win, but the firms want to be reasonably certain that they will win, so will access the likelihood of success very carefully before they agree to the conditional fee agreement.
The other kind of no win no fee agreement is the “contingency fee agreement”, also known in the industry as a CFA!! This is based on the US model of a share of the amount recovered, that we are familiar with from TV and film. From TV and film, we are comfortable with the idea. This is used in an administrative process and not where the matter is being litigated, so there is no risk of adverse costs (the loser paying the winner) and therefore no need for an insurance policy to protect from adverse costs. The fees are often far higher, but the firm again takes the risk that they may get paid nothing, clients are usually happy to have a share of something, rather than all of the nothing they had without the help of the solicitor.
There are also things like legal fees as part of your house insurance, but this can sometimes come with restrictions, because the insurer usually wants to know that either the fees are nominal or can be recovered via adverse fees.
There is no right and wrong answer on fees, some people like certainty with fixed fees, some people don’t want the risk of fees, so opt for a no win no fee and some just don’t want the uplift, so will pay an hourly rate. As long as the fee structure is understood, the choice of how to pay for fees is the clients.