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When it comes to hiring a lawyer, many contractors feel like a fish out of water. It’s hard enough for most construction businesses to negotiate payment with their own customers — you don’t want to waste time haggling over attorney fees. In this article, we’ll show you how to understand a construction lawyer fee agreement, the common types of fee agreements you’re likely to encounter, and how to negotiate one that works for you.
To break these down, we enlisted the help of three experienced construction attorneys:
- Cathleen Curl, a 30-year veteran of construction law in Millbrae, California
- Jason Lambert, a construction lawyer in Tampa, Florida
- Colin M. Schmitt, a construction attorney licensed in Pennsylvania and New Jersey
What is a lawyer fee agreement?
A lawyer fee agreement is a contract that clearly outlines the terms of the lawyer and client relationship, as well as the costs involved in that relationship. Just like the construction contract you sign before each project, the fee agreement with a lawyer spells out what they are going to do — and how much you agree to pay for it.
“An attorney fee agreement says what legal services the attorney is going to provide for you,” says Cathleen, “the rate the attorney is going to charge you for the legal services, how often they’ll bill you, and whether you need to pay a retainer.”
A fee agreement might not outline court fees so clearly, as they can certainly fluctuate between cases and court jurisdictions.
Cathleen also pointed out that “attorney fee agreements for construction matters will be different from fee agreements for divorces or personal injury matters.” Past legal experiences outside of the construction space won’t necessarily apply here.
Types of Lawyer Fee Agreements in Construction
Just as there are different types of contracts to operate under in construction, lawyers can use different forms of fee agreements. Here are some of the most common types of legal fee agreements used in construction.
Hourly Fee + Retainer
For more complex tasks or cases, lawyers may prefer to bill you for their time on an hourly basis. These fee agreements specify the hourly rate the lawyer will charge.
“Even the best lawyer has no way of knowing if or when the defendant will settle.”
Vaughan Baio & Partners
“Hourly fee agreements are like a time and material contract in construction where you pay based on the man-hours involved,” says Cathleen. “The lawyer will bill for legal costs (such as for court filing fees, process server fees, recording fees, etc.) separately without a markup.”
This is perhaps the most common type of fee agreement that contractors and suppliers are likely to encounter, especially if the case is going to court. Lawyers will often require a retainer — essentially, an up-front deposit to cover initial costs.
“The default approach for litigation is an hourly rate with a retainer, says Mr. Schmitt. “Even the best lawyer has no way of knowing if or when the defendant will settle, and it is unrealistic to expect that your attorney will also be willing to finance your lawsuit.
“However, a lawyer who is experienced in construction law should be able to reasonably forecast the opposing side’s tactics and how to approach the litigation in a manner that corresponds to your objectives as the client.”
So what do these hourly rates look like? “The average hourly rate for a construction attorney ranges from around $350 to $500 and up for larger law firms in large metropolitan cities,” says Cathleen.
Fortunately, most lawyers don’t round up to the nearest hour. Instead, they break their time down into sixths or tenths of an hour. So a 10-minute phone consultation may only cost $50 instead of the full hourly rate.
“The most common type of fee agreement that I work under is hourly billing,” says Jason, “typically with a retainer on the front end designed to cover the first phase of the work I’m doing, but primarily because a lot of my work is spent on dispute resolution like arbitration or litigation.”
As the name suggests, a flat fee agreement establishes a set amount that the lawyer will charge you for a particular task.
“Flat fees are generally charged for relatively simple tasks that don’t involve complex issues,” says Cathleen, “such as preparing a new home improvement construction contract for you. Not all construction attorneys charge a flat fee.”
“Flat fees are generally charged for relatively simple tasks that don’t involve complex issues.”
The Law Office of Cathleen M. Curl
In construction terms, a Flat Fee Agreement is similar to a Lump Sum contract. This type of agreement may even include court fees if they’re simple to account for.
When a lawyer draws up a fee agreement based on a contingency fee, they’re stating they’ll pursue your case in exchange for a percentage of the lawsuit judgment. Because many construction disputes focus on liability, contingency fee agreements are less common than hourly fee and flat rate agreements in the construction field.
According to Cathleen, this type of fee agreement is more typical in personal injury and auto accident cases, “where you are arguing about the amount of damages, not liability.”
Reverse Contingency Fee
Somewhat more complicated than the other formats, and less likely to find their way into a construction-related agreement, reverse contingency fees state that the lawyer will receive payment based on the amount of money that the client saves.
How To Read a Lawyer Fee Agreement: Carefully
We all know we’re supposed to read the fine print before we sign anything, but sometimes we aren’t as diligent as we should be. Entering into a legally binding contract with a lawyer of any kind is not the time to gloss haphazardly over the terms. Take your time and ask questions if you don’t understand something.
Cathleen also stressed the importance of reading and understanding the contract before you sign it. The following is a list of some points that she believes will help ensure you’re aware of precisely what you’re signing.
- Ensure the agreement clearly outlines the rate you’ll be paying for the attorney’s services. Is there a fixed-rate fee for certain aspects of the suit, even if you’re paying for an hourly rate? That fixed fee might be an area where you can negotiate, as most lawyers aren’t likely to reduce their hourly rates.
- The agreement needs to outline exactly what the lawyer is going to do for you. This includes reviewing your documents, important discussions about them, and whether or not they’ll file your suit for you. You need to know what you’re paying for.
- Is a retainer involved? Lawyers will hold retainer money in a trust account and use it as needed. Some fees and charges might come out of that retainer account, so it’s important to know what they are. Once those costs drain the retainer account, do you have to replenish it?
- Who will be working on your case? If other less experienced staff, such as a paralegal or junior lawyer, will be working on your case, the agreement should outline their rates, and they should be less than the principal attorney’s.
- Is there a minimum amount billed for legal services? If you call with a question and the call takes five minutes, will you be billed for a 20-minute minimum?
- How often will the lawyer bill you? Will it be monthly? If you don’t receive a monthly bill, the total can add up to quite a sum after a few months, so be sure you understand when to expect a bill.
- Are there additional charges for not paying your bill on time? Most attorneys charge a percentage for a late fee, so make sure the fee agreement outlines it. If you’re only a little late with your payment, ask the law office to waive your fee. Most will do so if you’re attempting to stay in good standing.
Negotiating a Fee Agreement with a Construction Attorney
Just like a construction company, lawyers have to get paid to stay in business. While most attorneys are trained in the art of negotiation, contractors shouldn’t shy away from seeking an agreement that works for their situation.
“Ask for things that make sense for your business.”
Dinsmore & Shohl
“My advice to contractors negotiating a fee agreement with their attorney would be to ask for things that make sense for your business,” says Jason. “While many attorneys operate on an hourly rate structure, there are many types of work where a flat fee, or a series of monthly payments, or something similar will work for both the attorney and the contractor. This can help a contractor plan for legal expenses as part of cash flow.”
Look for areas of the agreement that can be covered by flat rates. They may be areas where you can minimize your costs by asking for a discount. “Built-in flat rate costs might be areas worth negotiating,” says Jason, “and at least provide the contractor with a bit of financial security.”
Ask for a first-time customer discounted hourly rate. While lawyers rarely flex on their hourly rates, if they do, it’s usually at the start of an attorney-customer relationship when they’re trying to win your business.
For simple or straightforward disputes, you may consider hiring a less-experienced attorney to take the lead on your case. Newer lawyers can cost significantly less per hour, making almost every aspect of the case more affordable.
Of course, hiring an inexperienced attorney — especially one without a construction focus — can be more expensive in the long run. “The best way for contractors to keep their legal fees under control is to hire a lawyer who has a broad understanding of construction law,” says Colin, “and who understands that the primary goal is to get paid. Attorneys who can quickly identify the relevant factors in your construction dispute and who already have an existing knowledge of how to use the appropriate statutes, will provide guidance that is more efficient and a better overall value.”
Alternatives to Fee Agreements
Many legal issues contractors face can be navigated without signing a fee agreement. If this sounds like an approach you might want to take, the following are two options you might consider.
One way you can clear up some questions you might have about your situation is to simply ask. The Levelset Community provides a forum for contractors and suppliers to ask detailed questions and seek free advice. A national network of construction lawyers provide recommendations for next steps or ways to protect your business.
This free service helps contractors make informed decisions — and save thousands of dollars.
Legal Subscription Plans
In some industries, and even in some large companies, legal subscription plans exist that give businesses or employees access to a network of lawyers for a subscription fee that’s typically much lower than a standard legal fee.
Under these plans, a subscriber is entitled to a certain amount of hours of legal services per month or year. Subscription plans are a relatively young concept in the construction industry, Cathleen says, “because it’s such a specialized area of law.” But, she adds, it could be helpful for other legal issues, like general business or employment law.
Do you need a construction lawyer?
There are times when using an attorney is in your best interest. At other times, construction businesses can save money by handling the situation on their own.
Learn more: What does a construction lawyer do?
No lawyer, no problem
Not every dispute or issue requires hiring a lawyer. Payment delays or disputes are often best solved by improving your credit and accounts receivables process. Following up on invoices, sending a demand letter, or delivering notice of intent to lien can go a long way to prevent legal problems before they arise.
If you’re struggling to get paid on a project, you don’t necessarily need a lawyer to file a mechanics lien on the property. Every state allows construction businesses or laborers to file a lien on their own. If going this route, be sure that you follow all of the notice requirements, deadlines, and formatting rules included in your state’s mechanics lien laws.
Levelset helps thousands of contractors and suppliers protect their mechanics lien rights and file non-payment claims in every state.
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Learn how Levelset can help you easily manage your lien rights on every project to ensure your payments are always protected.
Yes, get a construction lawyer
According to Cathleen, you should probably seek a construction lawyer when you need to:
- Discuss the merits of your position in a dispute in detail
- Understand your legal options
- Foreclose on your mechanics lien
- Enforce a stop payment notice
- Review a contract
- Draw up a complicated, law-compliant contract
- Contest a complaint filed against your business to a licensing board
According to Colin, “The most common reason that a contractor hires an attorney is to collect outstanding receivables.” Though not necessary, lawyers can also add legal pressure to the collections process. A well-timed demand letter from a lawyer can carry additional weight that gets you paid faster.