What is a Legal Costs Agreement?

If you want to consult a lawyer you should figure out how much you want to spend first, and then get some idea of what it is going to cost you. In Australia, if your legal costs are going to be more than $750, lawyers are required to provide you with a costs agreement setting out how they calculate their fees. Some State or Territory law societies or law institutes (professional representative bodies for lawyers) have examples of standard costs agreements on their websites.

If you don’t understand the costs agreement you need to ask for it to be explained to you. Essentially, it is a bit like a mortgage document. A mortgage contract will usually allow the financier to recover from you the amount borrowed, put interest, costs and charges and any additional costs incurred in chasing you for payments or foreclosing on your house. If you have other accounts with the financier, they can usually access those accounts to recover funds too.

What a legal costs agreement does is set out the hourly rates that you will be charged for the different people working on your matter and any additional costs incurred by the firm (like search fees, cab charges, etc). You should be provided with a broad estimate for the work that you are seeking with a catch-all phrase that says the estimate is not binding and subject to change based upon any changes in instructions that you give to your lawyer.

Since most people who consult a lawyer do not have a clear idea of the legal work that they require, the estimate is likely to change and you will be required to pay whatever it is you are charged.

A copy of a legal costs agreement should be provided to you as soon after you consult a lawyer as possible. If you have time, it is advisable to ask to see a copy of the firm’s legal costs agreement prior to seeking their advice. This is not always possible.

Legal invoices usually set out a description of the work that has been done with a total amount for the time spent completing that work. Firms rarely identify the individuals completing the work, the hours they have put in doing particular tasks and the corresponding costs, although you are entitled to request those details.

In the event that there is a dispute over fees you should raise any dispute within 30 days of receipt of the invoice and confirm your query in writing. If a dispute over fees escalates to review by the legal services commission it will drag on over months and the firm will have their basis for charging closely reviewed. Legal firms are businesses and will generally prefer to negotiate a settlement, provided it is reasonable, rather than allow a matter to escalate. In any review by a legal services commissioner, the basis for the review will be what costs are reasonable in the circumstances. As you can imagine, ‘reasonable’ is a flexible concept and may depend upon the complexity of the matter and the way in which it has been handled.

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