- Luke Korkowski
How to Hire a Real Estate or Business Lawyer (Part 1)
Hiring a lawyer is rarely fun. Most people who need a lawyer are either dealing with a stressful dispute or they are overwhelmed by the uncertainties associated with a transaction or business venture of some kind.
Let's see if I can demystify at least a little bit of the process. Because Aaron LLLC is a transactional law firm -- we don't handle litigation, evictions, or other disputes -- I'll focus on hiring my firm or firms like ours. In this first post, we'll talk about the nitty-gritty of how much a lawyer costs and how you pay them.
Lawyers are not cheap. Most attorney work is billed by the hour. In Hawaii, you'll typically see a range of hourly rates from $225 or so to $500-ish.
Generally speaking, the more expensive a lawyer is, the more experience they have or the more specialized and technical their practice area (e.g., patent or tax work).
Theoretically, that should mean that they also work faster, but that's not always the case. Also, as with everything, "experienced" doesn't always track perfectly with "high-quality."
At the moment, I charge $300 per hour. I've been an attorney since 2006 (with just a short year and a half break around 2012 or so) and have focused all of my practice on real estate and small business transactional work.
Some lawyers will charge flat fees for some kinds of work. In those circumstances, they will usually define the scope of the work they are supposed to do for you and will perhaps include a certain number of hours allotted to the task.
This can be handy when you need more certainty up front as to costs. My firm will sometimes do flat fees, but most of our work is hourly.
Litigators are lawyers who go to court to argue your case or otherwise help you with a dispute. Litigation attorneys will sometimes work on a contingency basis, which means they will only get paid when they win your case and recover money from the defendant. In such cases, I hear that these lawyers will charge in the neighborhood of 25%, 33%, or even up to 40% of the recovered amounts (often tacking on costs as well). The allowed percentages vary by state and by the court handling the matters.
Some litigators will blend contingency fees with some hourly or flat fee work.
Transactional lawyers usually are not allowed to charge contingency fees so we cannot, for example, charge you a percentage of the price of a business deal we help you with.
When an attorney does work for you, often they have to file paperwork with a governmental entity or they have to pay third parties for some ancillary service. Lawyers usually call these "costs" and they'll pass those costs on to you.
A good example is the filing of a deed at the Hawaii Bureau of Conveyances. In many cases the cost of doing so is $41 (this varies), and that cost will ultimately be paid by you. Such costs are relatively rarely included in the fee quote an attorney gives you.
Advance Fee Deposits, Evergreen Funds, and Retainers
Most attorneys require an advance fee deposit. This means that you pay some amount up front that goes into the lawyer's trust account. Those funds remain your property, but the lawyer has possession of them. Then, when it's time to bill you, they bill from the trust account.
Lawyers like to take client deposits in order to ensure that they get paid for work they do and so that they know that any costs they front for you will be reimbursed to them.
If the lawyer finishes representing you and there's a balance left over, the lawyer will refund that balance to you.
I understand that litigators can take $5,000, $10,000, or even $25,000 advance fee deposits before they get started on your matter. As a transactional attorney, I usually take a $2,000 advance fee deposit. This can change depending on the anticipated amount of work, though.
Some law firms will have an "evergreen" approach to advance fee deposits. This means that as they bill you, they withdraw funds from your trust account balance to pay that bill (quite normal for almost all lawyers) but then they bill you directly to replenish the advance fee deposit. That way, if they've taken, say, a deposit of $2,000, as long as you're their client that trust account balance always stays at $2,000...which is to say it is "evergreen." I rarely do this in my practice, but sometimes it's appropriate.
There is some confusion about what a "retainer" is and how it compares to an advance fee deposit. Like advance fee deposits, retainers are paid by the client up front and go into the trust account.
However, retainers mean that you've hired the lawyer to reserve some of his time every month to work on matters for you. By dedicating this time, the lawyer if providing you with a service, namely being available. If you finish the month and have not used the lawyer to actually do any legal work, you still get billed for the time retained. Many retainers are recurring.
Currently we don't offer any retainer services. You should know also that the way attorneys and others use the terms "retainer" and "advance fee deposit" varies a bit, which leads to a lot of confusion. Always ask for clarification on these points when hiring a lawyer.
Paying a Lawyer
Lawyers are subject to comprehensive ethical rules around payment and the handling of funds. For this reason, many attorneys do not take credit card payments and insist on wire transfers (for large amounts) or paper checks.
More and more, though, lawyers are willing to take credit card or even cryptocurrency electronic payments. Aaron LLLC takes all payments via an online credit and debit card system, including advance fee deposits.
We've addressed the nuts and bolts of fees, costs, and payments, so in the next post we'll shift gears a bit and talk about how to find a decent attorney, initial consultations, and what to expect in dealing with your legal advisor.