What's in a retainer letter from a lawyer?

A retainer letter is a letter from a lawyer to a client that confirms what the lawyer is going to do for the client and how the client is to be billed for that work. Although the word "retainer" is often thought to be a sum of money that a client pays to a lawyer ahead of time for work to be done, it means more than that. It also means the working relationship between the lawyer and client.

Lawyers in Alberta are required by their Code of Professional Conduct to send each client a retainer letter either before they start work for the client or very soon after (depending on the circumstances). The purpose of the letter is to make the financial arrangements clear so that misunderstandings and disputes are kept to a minimum.

The letter should describe what the lawyer is going to do for the client. For example, it might say that the lawyer is going to prepare Wills, Enduring Powers of Attorney and Personal Directives for Mr. and Mrs. Smith. As another example, it might say that the lawyer is going to probate the Will of Jonas Smith, or bring an action against the Estate of James Smith on behalf of Donna Smith. As you can see, some jobs are much more involved than others, so it's going to be easier for the lawyer to explain what the simpler job will cost.

The retainer letter must let the client know what to expect in terms of bills. The retainer letter might state a fixed fee, such as $1,000 to prepare the Wills, Enduring Powers of Attorney and Personal Directives for Mr. and Mrs. Smith.

A fixed fee has limits. For example, when you have a Will prepared, most lawyers will correct any errors (such as a name spelled incorrectly) they have made in drafting without charging you for the extra time. Most lawyers will also make a few small changes, such as giving a charity 15% of your estate instead of 10% without charging you extra. However, if you make a dozen phone calls to the lawyer and request changes or rewrites each time, you have substantially changed the intial retainer and will likely be charged more.

When matters are more complicated, it can be pretty tough for the lawyer to give an accurate estimate simply because nobody can know at the beginning of a lawsuit what steps will have to be taken. For example, you can't usually tell at the beginning of a case whether the other person is going to dispute it, negotiate a settlement or admit liability. If this is the case, the lawyer may tell you that the amount of the bill will depend on the time expended on the lawsuit. In other words, the client will pay an hourly rate to the lawyer and the more hours that are spent, the more expensive it will be.

If there is an estimate made, it is based on assumptions the lawyer is making. Often the assumptions arise from information given by the client, and if the assumptions are wrong it's going to change the work the lawyer has to do, and the fees that will be charged.

Another possibility, is the contingency arrangement, in which the lawyer agrees to take a percentage of an amount won in court or on negotiation as the fee. The lawyer and the client must agree on the terms of a contingency arrangement and there must be a written, signed agreement in place.

In the retainer letter, the lawyer will confirm whatever fee arrangements you discussed in your meeting or telephone call.

Other things you might look for in a retainer letter are:

• a confirmation of any amount you've already paid in advance
• whether the lawyer requires you to put any money down before starting work
• how often you are going to be billed (monthly etc)
• whether disbursements (out-of-pocket) are to be billed to you
• any special arrangements regarding fees, such as confirmation that fees will be collected from the estate of the deceased after probate is issued
• taxes (including GST) that are going to be charged

Sometimes retainer letters are combined with other useful information or material. On probate files, for example, the lawyer might expand the retainer letter to ask for information needed to complete the inventory of the deceased's estate, or to give you a checklist of things you need to bring to a meeting.

If you ever have a question about your retainer letter or how you are being billed, make sure you bring it up with the lawyer as soon as possible. Leaving misunderstandings unresolved won't lead to anything positive and may even escalate that misunderstanding into a dispute.