Priced for value

Written by  Posted Date: June 5, 2017
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Canadian Lawyer
’s annual Legal Fees Survey shows that the billable hour is far from dead, but it doesn’t hurt to get creative.

According to this year’s survey, 53 per cent of respondents have no plans to change their current fees. In a modest increase over last year’s 42 per cent, 45 per cent of respondents are planning to raise their prices and only 0.6 per cent plan to lower them. Last year, three per cent planned to cut their prices.

Benjamin Hecht, managing partner at Pitblado Law in Winnipeg, says legal fees are “on a steady increase.

“Not in terms of market adjustment, but in terms of base rates rising based on lawyers’ year of call,” Hecht says, noting that seems to hold true across the board in the profession.

The annual Legal Fees Survey looks at the going rate for 45 matters in nine practice areas: civil litigation, corporate-commercial, criminal, family, immigration, intellectual property, real estate, wills and estates and labour and employment.

Results are divided by region. This year, 46 per cent of the 600 respondents were from Ontario, 42 per cent from offices in Western Canada (Alberta, British Columbia, Manitoba, Saskatchewan and the North) and nine per cent in Quebec or Atlantic Canada.

The bulk of respondents — 48 per cent — work in law firms with one to four lawyers, with 29 per cent working at firms of five to 25 lawyers, five per cent at firms of 26 to 100 lawyers and 14 per cent at firms of more than 100 lawyers.

Hussein Hamdani, partner at Simpson Wigle Law LLP, a firm of around 30 lawyers with offices in Hamilton and Burlington, Ont., says clients are always fee sensitive.

“We try to have a discussion — at least in my practice — with all my clients well before the pen hits the paper, what we think our estimated cost will be, what we think our timelines will be on it,” he says. “I want them to trust me and part of that trust is that I’ll be fair with them with respect to billing; that we’ll have that conversation and be on the same page.”

For 44 per cent of respondents, initial consultations are free, with the next largest group — 17 per cent — charging between $301 and $500.

“The approach that I take in my practice and that’s so far been successful is I want to be their trusted adviser and part of that is I don’t nickel and dime them,” Hussein says. “If they call me and ask a question, I don’t send them a bill.”

He says fee conversations can depend on the nature of a practice as well, noting the fact he has a lot of owner/operator clients in his general corporate commercial practice helps with fee discussions because they have businesses and understand cash flow.

Hourly rate was still the top method for charging clients, with 87 per cent of respondents choosing it. Flat fees came in second, with 66 per cent, and 47 per cent said the use of flat fees applies in less than 25 per cent of the firm’s work. Rising discounts were least popular with 4 per cent of the vote.

“I’m a partner and my hourly rate is $405, but I have juniors, clerks and students with various rates and I see if a client is OK with a combination,” Hussein says, noting communication is key.

“If I talk to them about this is how many hours I think it’ll take to do what you’re asking me to do, this is what the hourly rate is, this goes a lot further than just saying this is going to be X dollars.”

Hecht says that, in the Winnipeg market, there don’t seem to be any significant pressures — on Pitblado, at least — to change drastically the way it does business.

“The billable hour is definitely not dead here,” he says. “At times, we have utilized alternative fee arrangements — sometimes at our own initiative, sometimes at a client’s request — but I wouldn’t say there’s a significant increase in the types of matters that are services using a flat, block or alternative fee arrangement.”

Hecht says with anything litigation-oriented or adversarial, it’s difficult to do flat fees because “you’ve got a significant wild card in an opposing party.”

In those cases, budgets and projections are the best one can do.

Hussein says his firm has a creative way of billing when it comes to startups. A fee is agreed upon upfront, and the startup provides enough of the fee to cover the firm’s HST and disbursements. The new business then has 10 months to pay the rest at zero interest. He says it’s a popular option.

“We know if we help this company get on its feet, they’ll be able to come back to us more. But if we try choking them out right at the very beginning, we only have one swing of the bat,” he says, adding he doesn’t know another firm — at least in the Hamilton/Burlington market — that does it. “It’s investing in our clients and them investing in us. It’s investing in the relationship.”

Hussein says he also tries to talk to clients about value billing. He’ll look at a file and see what kind of value was added and adjust the fee up or down depending, but “that’s a little bit harder to do because you don’t have that upfront discussion.” He says it can be helpful to offer a range of what the file could end up costing.

Working with angel investors and target companies, the strategy in the past has been to charge X dollars per investor on the transaction — but the lawyers only got paid if the deal closed.

“It was always a feast or famine type of approach,” Hussein says. “We’re changing that now — either you want to do the X number of dollars per investor or we’ll do an hourly rate, usually myself and juniors, and the combined hourly rate is Y dollars and if it doesn’t close we still expect Y dollars for the time that we’re doing.”

Hussein says the firm has expanded on that to allow more of a conversation and then a choice.

“It’s about being creative in certain circumstances and finding a solution that works for all the parties.”

For the majority — 63 per cent — alternative staffing strategies such as part-time or contract lawyers, outsourcing non-lawyer functions or creating a low-cost service centre for back-office functions are not something they are currently pursuing.

Most firms haven’t changed pricing strategies from last year, with 71 per cent reporting no change. However, 15 per cent say a change is under consideration.

For Hussein, there are no plans to change fees, at least not in the corporate commercial department where he practises. He says, as part of the Corporate Clerks Committee, there’s a consensus that the fees charged are all “fairly market rate,” at least for things such as incorporations, amalgamations or articles of amendment.

“They haven’t been raised in a very long time, but we believe they’re good where they are right now,” he says.

In the fall, Pitblado “engaged in a rate analysis to better align with mid-Canada market rates” for 2017.

“There were some senior lawyers who kept their rates steady, as they were already priced competitively, but, otherwise, I would say the majority of our lawyers would have seen rates increase by an average of five to 10 per cent,” he says.

This was reflected in the survey results, which showed modest bumps in hourly rates tied to years of call.

One respondent summed it up best when they wrote that “into 2017, the dynamic legal fees landscape continues to change. We are constantly being driven to rethink our value proposition to our clients — an exercise that ultimately benefits both parties.”

Keep reading to discover the going rate for your area of practice and to find out how your fees match up with the competition.

Click here to read full survey with charts.

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Comments   

0 # ReaderJack Morganstern 2017-06-05 17:08
How is an average Canadian to pay such high fees for Justice? Our judicial system is complex. Either a wealthy individual or someone on Legal Aid has better access to Justice than a middle class Canadian who is paying taxes which presumably feed into Legal Aid, but is unable to pay fees for oneself. Why is Canada not exploring alternatives like Legal Insurance, this may not be the right answer, there have to be innovative solutions, especially for Family Law.
Even with Legal Aid, genuine cases are being rejected and cases where alleged fraud is staring in the face are being funded.
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Mallory Hendry

Mallory Hendry is associate editor for Canadian Lawyer. Mallory is dedicated to delivering the latest news in legal education across Canada. She contributes to both print and online content.

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