Canada’s slow and steady economic recovery seems to be reflected in the country’s legal market, with lawyers split down the middle on the merits of a price hike.
For the second year in a row, a narrow majority of respondents to Canadian Lawyer’s Legal Fees Survey indicated plans to freeze rates over the next year, with 52 per cent opting for a no-change approach. But at the same time, average hourly rates rose across the board compared with last year’s survey, while fee estimates for individual matters increased in most categories for 2014 over 2013 responses. Based on feedback, we’ve expanded the survey to assess the going rate for 38 different matters across eight practice areas: civil litigation, corporate-commercial, criminal, family, immigration, intellectual property, real estate, and wills and estates.
Just four per cent of respondents intend to cut rates in 2014, and of the 44 per cent increasing fees this year, almost half (45 per cent) are planning hikes of between five and 10 per cent, well above the national inflation rate, which stood at just over one per cent in the first quarter of 2014. A further 23 per cent will boost fees by more than 10 per cent, while 32 per cent are aiming for more conservative rises, between zero and five per cent.
The most commonly cited reasons for price rises included increasing overhead costs, inflation, and greater complexity of the work lawyers are taking on. One British Columbia-based boutique opted to raise its fees because a few years of relatively static pricing had left its rates trailing “below the average rates of our competitors,” while a lucky Ontario sole practitioner explained his rationale for a price rise: “I’m so busy that I can be more selective in clients.”
Hourly rates are on the rise across the nation, according to our survey. One-year calls command an average rate of $218 per hour, up 13 per cent over 2013. Rates for five-year calls and 10-year calls were each up four per cent over last year, bringing in $267 and $322 per hour respectively. Lawyers with 20 years at the bar averaged $390 per hour, up seven per cent, and those with more than 20 years experience charge $394 per hour, up about four per cent. The increased levels are, however, still some way short of the 2009 peaks, when 10-year calls charged $365 per hour, averaged across the nation.
Despite those positive signals, many respondents also expressed concerns legal fees have hit a ceiling, a view particularly prevalent among small firm and sole practitioners, who account for the bulk of survey participants. Three-quarters of our respondents practise with firms of between one and four lawyers. “There is increasing financial pressure between what fees individual and small business clients can afford and the expenses of overhead and accessing operating capital,” wrote one small firm lawyer from Toronto, summarizing the pessimistic view. Another sole practitioner planned to raise fees this year, but questioned how much longer that could go on when the “market is limited and not really growing, but there are more lawyers every year.”
Practice areas where lawyers particularly felt the squeeze included residential real estate and wills and estates. Despite small or non-existent profits in those areas, lawyers were split on whether to drop them from their suite of services. Real estate is “becoming commoditized and clients are not willing to pay the true value,” said one respondent who had recently stopped offering real estate services, but many others persist, viewing them as loss leaders bringing in new business — which has been the case for many years now.
Another loss leader dividing opinion among survey participants was the issue of the free initial consultation. Just under 60 per cent who answered said they charge nothing for their first meeting with a client. Smaller firms were less likely to offer free consultations, with the proportion dropping to 53 per cent among respondents in one- to four-lawyer firms. More than three-quarters of respondents in firms with five lawyers or more offered initial consultations free.
The chance of getting a free consultation also seems to shrink with the size of your community. Just 36 per cent of lawyers practising in communities with a population of 100,000 or less waived the initial fee, compared with 65 per cent of respondents from cities larger than 100,000.
Those charging a fee tend to offer a reduction on their full hourly rate, but others were adamant clients should pay right from the start. “Free initial consultations are always taken advantage of and not worth the alleged goodwill. A lot of time is wasted,” wrote one rural lawyer. An estates lawyer added a “significant consultation fee” is needed in their area because “if a client is not willing to pay $200 for an initial consultation then there is a 95-per-cent chance the meeting is going to be a waste of your time.” However, a Newfoundland and Labrador lawyer said clients should not “have to pay to find out whether or not you’re able to help them,” but admitted spending “a lot of time not getting paid.” For one Montreal sole practitioner, a free consultation is a matter of honour: “Many people are afraid to call me because they think I have a clock running and they will get a bill at the end of our first phone call. That is ridiculous. I don’t know how lawyers who charge people to check them out can sleep at night.”
Many of our respondents are experimenting with alternative billing structures in an effort to keep clients happy and increase efficiency. An insurance boutique began offering blended rates after a client demanded alternate fee structures as a prerequisite for firms looking to bid on its business. Volume discounts, contingency fees, and unbundled services were popular options, but one lawyer at a mid-sized Vancouver firm conceded they struggle to get the sums right. “We increasingly get clients who would like to have accurate fee estimates, or better yet flat fees, but with most areas of our practice, we find it difficult to provide estimates of flat fees,” the respondent wrote.
The following information should help. Read on to discover the going rate in your area of practice.
Click here to see the results of the 2014 Legal Fees Survey.