Retainer Agreements: What Are They? Do You Need One?
The term “retainer” is usually heard during discussions involving legal representation, but what is a retainer and why is it needed? A common misconception is that a retainer is a large sum of money paid in advance to an attorney, and can seem intimidating to those unfamiliar with the legal system. Instead, a retainer agreement helps to define and solidify the attorney/client relationship.
Do I Need To Sign A Retainer Agreement?
When the need to obtain legal counsel unfortunately arises, you will likely meet with an attorney to have an initial consultation. This serves as a fact-finding opportunity for both you and the attorney, as you both determine whether the case will be best served with this client/attorney combination. However, many clients assume that there is an attorney/client relationship at this time in the process and disclose many case details or ask for legal advice. At this point, a retainer agreement is required in order to legalize official attorney representation.
In the state of New York, an attorney in a domestic relations matter cannot represent anyone without a retainer agreement or without a signed statement of client rights. While the statement of client rights is a standardized document, retainer agreements are attorney-specific and change according to various circumstances: the type of case they are applied to, the client, and even with particular case details. Having a signed retainer agreement is when the client/attorney relationship is officially solidified. In fact, without a signed retainer agreement in place, the attorney could be subject to forfeiture of their fees.
What Information Is Covered In A Retainer Agreement?
While retainer agreements can and will vary from one attorney to another (and even from one case/client to another,) there are some items that should appear on each one.
- Type of services rendered: This defines what services the attorney is agreeing and obligated to provide to the client for the fee paid. For example, is the lawyer strictly consulting with you about your case, or agreeing to represent you in court? (No attorney can promise a certain outcome of any case.)
- Billing terms: The agreement should define a minimum of itemized billing every 60 days as well as the billable hourly rate for anyone on the case, including the lawyer, legal assistants, etc. Billable hourly rates must be reasonably comparable to those of other attorneys in the area providing a similar service in order to prevent price gouging.
- Retainer payment details: The retainer agreement will describe how that case’s retainer payment will work. How much is the attorney’s retainer payment? When does it need to be replenished? What happens to any remaining retainer funds if the client/attorney relationship ends?
- Arbitration: Each retainer agreement should define that a client has the right to arbitration before going to court for unpaid retainer fees.
Essentially, anything regarding fees must be clearly laid out within the retainer agreement, including any interest rates, credit card fees, and even the expected administrative fees that a client might see on the itemized bill (copies, postage, courier services, etc.)
Any changes to the scope or nature of a case will result in the need for a new retainer agreement to be drafted and signed. For example, if a client starts off merely wanting consultation during a potential marital separation, a specific retainer agreement will be in place. If the client then decides to ask that attorney for representation during a divorce or custody case, a new retainer agreement would need to be drafted to reflect these changes.
Any changes to the agreement must be made in writing.
Retainer Payments – What Are They And How Much Are They?
A retainer fee is simply a lump sum of money that covers the cost of legal services up front. The retainer amount can vary, depending on the lawyer and the circumstances of the case. For example, one attorney may request a $1000 retainer, where another may request $200 or $5000. It can depend on the expected billable hourly rate, the type of case (a murder case may require a significantly higher retainer than a consultation on starting a new business) and the attorneys themselves.
As the client’s retainer payment dwindles, the retainer agreement defines when the client must replenish it. For example, if the client paid a $500 retainer, the lawyer may say in the agreement that once the retainer is down to $200, it must be brought back up to at least $500 again.
What happens if the client fires the attorney or the attorney withdraws from the case? In these circumstances, the remaining retainer payment must be returned to the client. However, there are some “flat fee” cases, where if the attorney’s fees end up being less than the originally quoted “flat fee,” the remaining retainer funds do not need to be refunded. For all matrimonial cases, the attorney must refund any leftover retainer fee.
Other Items That May Be Included In The Retainer Agreement
Some lawyers may include some of the following terms:
- The client’s right to be informed: This would indicate that the client has the right to be regularly updated on the status of the case. This also includes the client’s right to receive copies of all case documentation.
- The attorney’s right to client information: Where the attorney must keep the client up to date on the case, the client also has the obligation to keep the attorney updated with any pertinent changes, including contact information, or details that would affect the case.
- The right to review the agreement: The client has the right to have another attorney review the retainer agreement, should any of the terms seem questionable.
- The attorney’s right to place a lien on the file: Should the client stop paying the attorney as specified, the attorney has the right to put a hold, or lien, on the client’s file until the bill is paid.
- Clients are not charged for billing inquiries: If a client has a billing question, the time spent rectifying their concern cannot be charged as a billable hour.
Retainer Agreements Are Essential
Having a signed retainer agreement helps to ensure that both client and attorney expectations are clear, defined, and agreed upon. Clients should ask their attorneys about any details they may not understand prior to signing the agreement, or have the document reviewed by another legal representative. The retainer agreement is critical to protect the interests of both sides in a client/attorney relationship, and should not be skipped under any circumstances.