Canada’s legal industry seems to be taking a cautious approach to economic recovery, as Canadian Lawyer’s 2010 legal fees survey indicates widespread fee reductions have been ushered in for the year ahead.
An unprecedented number of lawyers — more than 600 — from across the country responded to our annual survey this year. Many are certainly planning to hike their rates on some matters, but on average, those offering services in civil litigation, criminal law, intellectual property, real estate, and wills and estates plan to give clients a break this year.
The survey also indicates lower average hourly rates for lawyers with five or more years of experience. For example, the average hourly rate reported for lawyers with 10 years of experience in Western Canada dropped a whopping $130, to $337 this year from $467 in 2009. Respondents pointed to general economic malaise and client demands when asked why they have reduced fees. One simply commented, “Clients are tighter with their money.”
The 2010 survey again offers a glimpse at 26 fees charged in eight areas of practice — civil litigation, corporate, criminal, family, immigration, intellectual property, real estate, and wills and estates. Responses have also been compiled from different regions of the country, including Ontario, Western Canada, and Quebec and Atlantic Canada. Results are also broken down by firm size, with stats on firms consisting of one to four lawyers, five to 25 lawyers, and 26 or more lawyers presented separately.
This year’s survey continues to offer a healthy number of responses from across the legal industry spectrum. In terms of firm size, 55 per cent of respondents came from firms of one to four lawyers, 27 per cent came from five- to 25-lawyer firms, and 18 per cent came from firms with 26 or more lawyers. With respect to location, 50 per cent said they practise in Ontario, 39 per cent in the West (Manitoba, Saskatchewan, Alberta, British Columbia, and the North), and 11 per cent in Atlantic Canada/Quebec.
Interestingly, 52 per cent of people who answered the question regarding lowering or raising their fees said they would be increasing what they charged clients in 2010. However, according to the fee charts, averaged responses in 16 of the 26 fee categories showed a decline in the rates reported in our 2009 survey. Nonetheless, 42 per cent of those who said they have boosted fees reported an increase of five to 10 per cent, for the most part, in response to inflation and higher overhead.
Meanwhile, 46 per cent of respondents said they are keeping fees at the same level this year, and one respondent cautioned firms pondering a rate drop. “My general view is that lawyers cost-cut in certain areas such as real estate and wills/estates in order to compete, but the effect is to devalue our services in the eyes of the public,” said one lawyer. “The services we provide as a profession are valuable and we don’t [help] ourselves or others in the profession by reducing fees to impractical levels.”
Those raising fees cited a wide range of factors, from inflation to increased complexity of matters. One respondent said, “A combination of more lawyers chasing fewer clients means charging more to stay even.” An Ontario lawyer pointed to “higher costs of practising, including increases to LawPRO, [Law Society of Upper Canada] fees, rent, office supplies, staff; also my increased experience.”
Respondents were also asked whether their firm offers different fee structures, such as blended hourly rates, or rising discounts. A large swath of respondents answered in the affirmative. Some said they get creative with fees based on volume of work from the client, early payment, client requests, or because the client simply can’t pay the full amount. A mix of blended rates and fixed fees seemed to predominate but contingency fees for a variety of work including class actions and wrongful dismissals were also mentioned by a number of respondents. Many also noted that discounts applied most frequently to larger volume clients.
One respondent reflected on the struggle firms face in taking a consistent approach to alternative billing. “In-house clients are demanding creative fee structuring not tied to hourly rates,” the lawyer wrote. “It is a challenge as the business realities and priorities of the client changes. To date, we have not been successful in consistently applying a different fee structure for the type of work we perform.”
Respondents were also asked whether certain areas of their practice are no longer profitable, and whether they plan to phase out those specialties. Most notably, many who identified themselves as small-firm lawyers or sole practitioners said wills and estates and real estate continue to prove less valuable to the bottom line. Yet these lawyers remain reluctant to turn down such files. “Wills; we won’t phase out though — loss leader to bring clients in,” wrote one lawyer. “We would rather prepare than have them do their own with a kit.”
Commented another: “We carry on a full general practice as some clients will end up needing certain services and we want to be able to provide them, even if not profitable. We have reduced our exposure to family, criminal, and residential real estate in the last 12 months, but do continue to carry a large practice in all areas.”
Click here to view the survey