The Three Types of Legal Fees

The amount of legal fees is an important factor to consider when considering whether to commence a legal action in Small Claims Court and evaluating options. This is, of course, very understandable. At the end of the day, retaining a legal representative is a business decision. Small Claims Court cases, criminal charges sand landlord-tenant matters alike should be handled in a way which is not only the best from a legal point of view, but is also economically and financially practical. With this in mind, it would be useful to understand the basics of how lawyers and paralegals structure their legal fees. This may help to choose between a lawyer and paralegal and receive the best value for your money.

At this time, there are three basic ways in which the legal professional calculates and charges his or her fees:

  1. Hourly Rate
  2. Contingency Fee
  3. Flat Fee

Hourly rates (or billable hours) are used mostly by law firms – big and small alike. The concept of the billable hours has been in existence and active use for hundreds of years. Everybody knows how this works: a legal professional asks the client to sign a retainer agreement which outlines an issue to be addressed and resolved and sets out that a client pays the lawyer a certain amount of money for each hour of his or her work. The obvious inconvenience of this type of money retainer is a high degree of uncertainty for a client, who does not know and has no way to know how much he or she will pay at the end of the day. This is especially true for complex civil litigation or serious criminal charges.

A contingency fee is a relatively new way to pay for legal services. It has been around for two or three decades. The general idea of the contingency fee is that a legal professional gets a certain percentage of the money he or she managed to obtain for the client. This has become especially popular in insurance claims. “You do not pay unless we win!” is a very popular motto of many personal injury law firms. This type of fee is almost never charged in other civil litigation matters or criminal cases, however. It is a common misconception that the legal professional is read toy work for free up to the moment when money for the client is received. This does not often happen, however, because this is risky for the legal professional and the truth is, no one likes to work for free. The significant risk is that in real life, the outcome of a civil or criminal case cannot be predicted with 100 per cent confidence as it is subject to many factors which do not depend on the lawyer/paralegal or even on his client.

The last type of money retainer, the flat fee, was developed in recent years in response to growing public understanding of legal profession, as well as growing public need for quality and affordable legal services. The flat fee retainer is an agreement between a legal professional and his or her client that the client pays a fixed amount of money for a certain fixed amount of work. While some lawyers now work on flat fees, this arrangement is most commonly used by paralegals.

Let me explain how the flat fee works on the example of our firm. For example, Small Claims Court proceedings can be objectively divided into three major stages or procedural steps. They are as follows:

  1. Preparation, filing and service of the pleadings (a plaintiff’s claim or defence),
  2. Settlement conference, which is a sort of preliminary hearing presided over by a judge. The hearing’s objective is to try to settle the matter and narrow issues for trial.
  3. The trial, which is a formal hearing where witnesses are questioned under oath and documentary evidence is submitted. After the trial, a judge issues a binding decision (judgment) at the conclusion of the Small Claims Court trial.

As a paralegal firm working on flat fee arrangements, we charge a fixed amount of money for each of these stages. In fact, our client pays as he or she goes. That is, if the next stage is not required, no payment is due. We believe that this is a win-win approach. It creates trust and mutual interest in the best positive result and allows the client to keep his or her options opened at the same time. We use this approach not only in the Small Claims Court matters but while working on criminal cases and representing clients before Landlord and Tenant Board or Social Benefits Tribunal. If you have a matter we can help you with and are interested in this type of relationship, please contact us.

Sylvie, Toronto

I really appreciated your attention to details, your level of preparation which was impressive, and enthusiasm. I am really happy we have Spectrum Paralegal in our corner. Thank you for being the champion of our small claims court!