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 to represent you in a breach of contract case, they may require an advance payment of $4,000 to handle the issue. The attorney then deducts their hourly rate, the cost of drafting legal documents, and other legal expenses from the initial payment. If the legal costs exceed the initial amount, the attorney will charge an additional amount to cover what wasn’t included in the original agreement.
To understand what is covered by your legal fee agreement, you should thoroughly review the contract, as each arrangement is unique. A simple question like “What does my agreement cover?” may not provide enough clarity, since terms vary between contracts. To get precise details, request a copy of your agreement from your attorney and go over the terms carefully.
Retainer fee agreements typically contain the following information:
- The upfront payment amount or the installment structure
- Whether the advance payment is refundable
- Attorney’s hourly rates
- Fees for legal staff
- Cost of specific legal services
- Travel-related expenses
- Fees for document preparation and copying
Typically, attorneys send their clients monthly billing statements detailing the expenses incurred. Upon receiving the bill, clients are generally expected to make payments promptly. If a client delays payment, the attorney or law firm may place a lien on any recovery, property, or documents in their possession, ensuring they retain the property until the overdue balance is settled.
What Does an Attorney Do with the Retainer Fee?
Once a legal retainer is paid, attorneys are required by law to deposit the funds into a designated trust account. The attorney then withdraws funds from this account as legal services are rendered or expenses are incurred. These costs may include drafting legal documents, preparing motions, attending court hearings, and providing legal counsel. Attorneys typically withdraw these funds at the end of each month.
Why Pay a Retainer Fee?
Clients provide attorneys with advance payments to secure their services and ensure they are available when needed. For instance, if you are facing a criminal charge such as drunk driving, hiring a criminal defense attorney under a structured payment plan allows you to reach out whenever legal matters arise. Additionally, executing a formal agreement usually establishes an attorney-client relationship, enabling the client to leverage the attorney’s name or law firm’s reputation in negotiations. Having a well-respected attorney on board can provide an advantage when negotiating plea deals in criminal cases or settlements in civil lawsuits.
What Does it Mean to Have an Attorney on Standby?
Having an attorney on standby means that you have secured legal representation by making an upfront payment. Once an attorney is retained, they are available to assist you with legal issues related to your case. The initial payment remains in a separate trust account and is only withdrawn as the attorney incurs legal costs or provides services.
Things to Look Out for in a Legal Retainer Agreement
When signing an agreement for legal services, clients often enter a contract that primarily protects the attorney or law firm. Therefore, reviewing the terms carefully is crucial. Here are some key aspects to consider:
- Variable Costs
Some agreements state that legal fees are adjustable, allowing attorneys to charge higher amounts than initially agreed upon. If you prefer fixed costs, discuss this with your attorney and ensure the contract specifies a stable rate throughout your legal representation.
- Work to be Performed by Others
Many agreements contain clauses permitting attorneys to bill clients for work done by other legal professionals, such as paralegals or secretaries, at varying rates. To avoid unexpected costs, negotiate fixed rates for additional legal professionals and request a clear breakdown of who will be working on your case
- Arbitration Clause
Some contracts require clients to settle disputes with their attorney through arbitration rather than a jury trial. If you want to maintain your right to a jury trial, you may ask for a nonbinding arbitration clause, allowing arbitration to be the first step in resolving disputes while preserving your ability to pursue a trial if necessary.
Oral Agreements
A verbal agreement for legal services is generally not advisable. Some attorneys rely on oral contracts instead of written agreements, which can lead to misunderstandings. Always ensure that all terms are documented in writing to prevent disputes. Additionally, ask for a clause specifying the scope of legal work covered, such as whether appellate work or motion filings are included.
Earned Retainer Fee vs. Unearned Retainer Fee
An earned legal fee refers to money that an attorney has received as compensation for completed legal services. Once earned, the attorney can withdraw these funds from the trust account. Conversely, an unearned legal fee is money collected at the start of the representation but not yet applied to any legal work. Unearned legal fees must remain in a separate trust account until services are performed.
Is a Retainer Fee Refundable?
Legal retainers are typically nonrefundable. To determine whether the amount you paid is refundable, review your agreement, as most contracts outline whether a refund is permitted.
Is a Retainer Fee a Deposit?
A common misconception is that a retainer is a deposit. However, they are different. A deposit is generally used to hold services and is often refundable, while a legal retainer is an advance payment for future legal work. Once an attorney incurs costs and earns portions of the payment, they can withdraw their fees from the trust account
Understanding how legal fees work helps clients make informed decisions and ensures clarity in their attorney-client relationship. Always review contracts carefully, ask questions, and seek clarification before committing to legal representation.
