|Posted on August 16, 2016 at 11:40 PM|
Most complaints about lawyers concern how high their legal fees are. The professional fees charged by lawyers are notorious. When many clients earn an average of $20-40 per hour, it can seem unfair that your lawyers charge you hundreds of dollars per hour. However, as this article will demonstrate, there are reasons why legal fees are so high.
The main reason legal fees are so high is because it costs a lot of money to lawfully run and operate a law firm. Law firms incur all of the costs normally associated with operating an office (rent, wages, photocopy leases, furniture, power, stationary, paper, ink, tax etc). Inner city law firms pay massive amounts of rent and of course this cost gets passed onto you. Additionally, there are extra costs that law firms have to pay, mainly because the legal profession is so highly regulated.
In addition to normal business costs, lawyers also incur the following costs:
Professional indemnity insurance - this is liability insurance that all law practices are required to have. The costs of this depends on the size of the practice, but it is invariably expensive. This insurance is ultimately to the clients' benefit, as it ensures that in cases where lawyers make mistakes, clients can be compensated for this.
Practicing certificate fees - lawyers also must pay thousands of dollars every year to the Law Society in order to renew their practicing certificates. The cost of a practicing certificate depends on the type of certificate which is granted. Included in the cost of a practicing certificate is a fidelity fund contribution fee of several hundred dollars in order to reimburse clients who are defrauded of money by a small number of unscrupulous members of the profession.
Continuing Professional Development - every year, lawyers are required to complete 10 points CPD as part of their continuing legal education. This typically costs thousands of dollars per practitioner as the seminars/courses that must be attended or undertaken are rather dear. Lawyers can be severely disciplined for not complying with the above requirements. Because a solicitor's time is worth a lot of money, the monies spent on CPD are arguably small compared to the time expended on CPD which could be used on chargeable activities.
Trust account expenses - most firms hold at least one trust account, which is a bank account where monies which do not belong to the firm are deposited. Examples of trust monies include funds used for paying house deposits or outlays, and monies paid upfront by clients or third party payers on account of the firm's professional fees. Firms have to pay for annual external audits of their trust accounts, which usually cost a minimum of $1,500. Firms also have to deposit 2/3 of the lowest balance held in their general trust account of the previous year into a separate account. In addition, firms can be audited by the Queensland Law Society, with the costs of such audit being passed onto them. And of course, banks impose monthly account keeping and other fees on solicitors' trust accounts. Finally, the costs of keeping and maintaining records, including trust accounting software and the time spent by members of the firm also add up.
As a result, the financial costs of practicing law are enormous. There are however other reasons why legal fees are high.
Being a lawyer is one of the most demanding occupations. Lawyers have to negotiate competing demands placed on them by their clients, the courts, their employers, disciplinary bodies and their families. Some clients are difficult or have unrealistic expectations, and this ensures that they walk away unhappy with their lawyer, even when their lawyer has done an OK job.
The law is a competitive, adversarial and aggressive environment. Lawyers typically are required to work long hours, including sometimes on weekends. The consequences of mistakes and failures can be severe, including embarrassment, loss of reputation, being sued and even being disciplined.
As a result of these pressures, lawyers are one of the occupations whose members most prone to suffering depression.
For these reasons it is unsurprising that lawyers expect to be adequately compensated for the work they do.
Becoming a lawyer
The process of becoming a lawyer is a long and expensive one. The reality is that lawyers become qualified and eligible for practice at enormous personal and financial cost.
Lawyers have typically gone to university for many years in order to obtain a law degree and have then undertaken a diploma in legal practice in order to become a solicitor, or undergone training and mentoring to become a barrister. Before being able to practice law, they must be admitted to the legal profession. This is an expensive and time-consuming process which involves paying a large fee to the Legal Admissions Board, and filing an application and affidavit in the Supreme Court.
Even when they are admitted to the profession and commence legal practice, it takes many more years before a lawyer becomes sufficiently experienced and knowledgeable to practice without any supervision.
Put simply, lawyers are so expensive because the financial and other costs of practicing law are enormous. Many of these costs are due to the onerous regulation of the profession. The costs of legal practice inevitably must be passed onto the legal consumer, ie the client.
The good news is that clients can minimise their legal fees, as this article explains.