A retainer fee is money paid in advance to a lawyer for services that will be rendered. The retainer can be paid based on an estimate of the amount of work done for the client that month or can cover all anticipated work for the entire case.
For example, if you hire a lawyer to handle a custody matter you may pay them 5,000 to provide that service. In that case, every letter, phone call or time spent working on your case will be billed to the retainer amount that you’ve put on deposit with them. In some cases, if you do not use the full amount in some cases there is no refund or credit. It’s important to understand the retainer agreement and read the fine print before signing so you know just how any overpayments will be handled. If you use more than the amount of the retainer it is reasonable to be sure that you will have to pay additional fees.
There are a number of reasons that a lawyer may request a retainer fee. It can compensate the lawyer for the use of their expertise and reputation, even if it is because that particular lawyer’s name can help the client gain leverage or allow the case to settle quickly. There are instances where the right lawyer can even achieve a settlement after only a few phone calls or a letter. If that’s the case that the value of the retainer fee is obvious and the lawyer should be compensated for the use of his or her reputation.
A lawyer may also request a retainer fee when they are agreeing to be on standby for the case. When that happens the lawyer is essentially forgoing other gainful employment or business opportunities so that they are able to remain available when they are needed for the lawsuit. This is a major reason many businesses have lawyers on retainer if the situation occurs where a lawsuit is filed against a company a lawyer that is on retainer can be available immediately with their expertise.
Furthermore, retainer fees protect lawyers once the work has begun. If the case proceeds the lawyer can use the fee to defray costs as they work on the case. If a disagreement takes place or an unforeseen circumstance makes it impossible for the client to pay the lawyer the retainer fee ensures that the lawyer will receive at least some of their compensation for the time they’ve spent on the matter.
There are, inevitably, arguments against collecting a retainer fee up front. There are people who are simply put off by the idea of prepaying for a service and will choose to hire a lawyer who does not charge a retainer fee. That is often why a lawyer who does charge a fee upfront is a professional who is specialised in a major discipline, well-known, or exceptional in one way or another. Scarcity creates value which can provide specialised lawyers with an advantage when negotiating retainer fees.
Another argument against retainer fees is that for some potential clients there is a fear that if a case settles before much work is done the client will have essentially paid for nothing. However, the counter-argument to that is of course that the lawyer has potentially utilized his or her reputation and the client paid for the opportunity to use that lawyer to their advantage.
Finally, when given the opportunity to work with two similarly qualified lawyers many may choose the one who does not charge a retainer fee. Many lawyers are willing to forgo the fee or refund it if little or no work is actually completed before a settlement is reached. New layers may find that it is beneficial to refrain from collecting retainer fees so that they can compete against more seasoned layers with already developed reputations.
A lawyer’s choice of whether or not to charge a retainer fee is ultimately their preference. It’s important to evaluate layers and determine how experienced, well-known, and qualified that individual is before deciding if their expertise warrants the fee that they are charging. Most lawyers are willing to work with a client and find the best approach so that it is fair to both the lawyer and the client.