A retainer fee is one of the most common attorney fee schedules. A retainer is an amount of money that’s paid to a lawyer in advance to retain (hire) him/her to represent you in a legal matter. When setting a retainer fee, an attorney anticipates the amount of legal work that must be done and asks the client to either pay it in full or in installment payments, as determined by the terms of the retainer fee agreement between the attorney and the client.
For example, if you hire an attorney and ask him to represent you in a legal matter, such as breach of contract, he may ask for a retainer fee of $4,000 to handle the issue for you. The attorney then deducts his hourly rate, the cost for drafting legal documents, and other legal expenses from the retainer fee that’s paid at the outset of the representation. If the attorney incurs costs that exceed the retainer fee, he will charge you an overage to cover what wasn’t covered by the retainer fee.
To know what’s covered by your retainer fee agreement, you should go over the contract itself as it will set out the terms. Asking a general question, such as what does my retainer fee agreement cover is not enough, as every retainer agreement is unique, and the terms from one agreement to another will be different. To find out what’s covered, ask your attorney for a copy of your retainer fee agreement and look at the terms.
Retainer fee agreements typically contain the following information:
• The fee to be paid upfront or in installment payments
• Whether the fee is refundable
• Attorney’s hourly fees
• Attorney staff fees
• Cost of specific legal services
• Costs for traveling
• Costs for copying documents
Typically, attorneys send their clients monthly billing statements that show the client an itemized list of the expenses the client incurred. When the client receives the bill, usually, he will have to pay the costs immediately. If the client does not pay promptly, the attorney or law firm representing the client can place a lien on any recovery, property, or documents that are within the attorney’s possession, allowing him to retain the property until the client pays the overdue balance.
What Does an Attorney Do with the Retainer Fee?
After you pay a retainer fee, attorneys are required by law to place the fee in a particular trust account. An attorney then withdraws fees from the trust account as he earns them or as he incurs costs associated with his representation of the client. Attorneys typically withdraw the funds from the trust account at the end of the month. Costs incurred include the cost to draft legal documents, prepare motions, attend court, and giving advice.
Why Pay a Retainer Fee?
Clients pay attorneys retainer fees to retain their services and have them on standby and ready to assist the client in any legal matters that arise. For example, if you have been charged with drunk driving and you’ve hired a criminal defense attorney to defend you, having entered into a retainer fee agreement allows you to call the attorney and address any legal matters that arise. Also, as soon as a retainer agreement is executed, an attorney-client relationship is usually formed, allowing the client to leverage the attorney’s name or the name of his law firm as the name of the entity representing him in the legal matter. Having the name of a well-known attorney gives the client leverage when negotiating, for example, a plea deal in a criminal case or a settlement for a civil lawsuit.
What Does it Mean to Have an Attorney on Retainer?
Having an attorney on retainer means that you’re paying an attorney a specific advanced legal fee in order to retain (obtain) attorneys legal help in the event of legal troubles. Once an attorney is retained and a retainer fee is paid, the attorney is on standby to assist you with the legal issues for which you’ve retained the attorney. A retainer fee is kept in a separate trust account and can be withdrawn by the attorney only when he incurs legal costs or performs the work contracted by the client.
Things to Look Out For in a Retainer Fee Agreement
Often, when a client signs a retainer fee agreement, he is signing a one-sided document that contains many terms that are in there to protect the attorney and his law firm. As such, you need to read the retainer fee agreement before signing it. We will now go through some of the things to look out for in a retainer fee agreement.
- Variable Costs
We often see retainer agreements that state that attorneys fees are variable, meaning that the attorney can charge a higher amount of money that both sides initially agreed upon. So, if you want to ensure that the attorney’s fees remain the same throughout the legal representation, talk to your attorney and have them cancel out such a clause so that the attorney’s fees you’re paying remain constant.
- Work to be Performed by Others
Retainer agreements often include a clause that allows the attorney or law firm to bill an individual for services to be performed by others such as other attorneys, paralegals, or secretaries at undefined rates. It would be best if you negotiated other legal professional’s rates because these can quickly add up, and not having a flat price could lead to a large and unexpected legal bill. As such, ask the attorney to include the type of legal professionals who will be working on your case and the rates that these legal professionals will charge you to perform such tasks.
- Arbitration Clause
Many retainer fee agreements contain a clause that asks the client to give up his right to a jury trial and to settle any claims between an attorney and a client by an arbitrator. If you want to preserve your right to a jury trial for any disputes that arise between you and your attorney, you should not agree to an arbitration clause. You can ask the attorney for a nonbinding arbitration clause, which asks both parties to first go to arbitration, but the outcome of the arbitration is not binding. This means that the client still reserves the right to a jury trial if he is not satisfied by the outcome of the arbitration.
It’s probably not the best idea to have an oral retainer fee agreement. Some attorneys do not have written business contract and rely on oral agreements between both parties. You should not agree to an oral retainer fee agreement; you should always have everything in writing. This reduces the chances that there is any confusion as to what was agreed upon between you and your attorney. If there is any confusion, the it can be resolved by consulting the retainer agreement and see what both sides have agreed to. Also, if you can, try to have the attorney insert a clause the defines the scope of the work that you’re hiring him to perform. For example, will the attorney represent your case, including any appellate work, or work on motions? Having the scope of legal work reduces the possibility of confusion and make things more clear for both parties.
Earned Retainer Fee vs. Unearned Retainer Fee
An Earned retainer fee refers to a portion of the money that an attorney has earned through performing legal services for his client. Once an attorney earns a retainer fee, he can withdraw the funds from the special trust account. An unearned retainer fee is the amount of money that an attorney has collected at the outset of the representation but has not yet earned it by performing legal services for his client. An unearned retainer fee must remain in an attorney’s separate trust account until the services are performed.
Is a Retainer Fee Refundable?
Retainer fees are usually nonrefundable. To find out whether the retainer fee you paid to an attorney is refundable, you should consult your retainer fee agreement. Most contracts set out the terms as to whether the retainer fee is refundable.
Is a Retainer Fee a Deposit?
A source of confusion for many people is that they believe that a retainer fee is a deposit. A retainer fee is not a deposit. A deposit typically refers to a sum of money that’s used to hold services, and it’s usually returned to the payer. However, a retainer is typically used to refer to a sum of money that’s given to an attorney as an advanced payment for legal representation in the future. Once the attorney incurs costs and earns the retainer, he can withdraw his fees and legal costs from the account holding it.