What do you think of your costs agreement?
What would you say about your costs agreement? Here’s some comments I’ve heard:
- ‘I’m a bit embarrassed about our costs agreement’
- ‘I’m not sure if it’s compliant’
- ‘It’s a real crunch in gears’
- ‘I don’t think my clients even read it!’
Do any of those statements resonate with you?
I’ve long been intrigued by how the costs agreement actually works in the context of the solicitor client relationship. It’s not a stand-alone document, a box you have to tick – it actually has a function and an ongoing impact in the solicitor-client relationship. The question is, does it function positively or negatively?
Some of the things I’ve observed are that
- many solicitors regard the costs agreement as a necessary evil, just a regulatory requirement
- too many lawyers use costs agreements are not compliant – they work off old precedents that are not fit for purpose
- while more lawyers use a costs agreement that is compliant, it’s written for the wrong audience – for the regulator or the Court rather than the client
- too many costs agreements are hard for clients to read and understand – they are long, not in an order that makes sense to the client, they have no informational signposts and key information is buried a few pages into the document
- a long document in legalese can be a red flag for a client, making them wonder if the lawyer is a bit tricky.
Costs agreements that do - and don't - work
I worked in legal profession regulation for nearly 30 years and in that time, I assessed, supervised or worked on 14-15,000 complaints, many of which had a cost element involved. I also did a deep dive study into a group of completed costs complaints, reconstructing the matter from end to end and working out where and why things went off the rails. Knowing why things go badly has helped me to understand how they can go well, and how the costs agreement can be an instrument to build trust rather than erode it.
What does it look like to have a costs agreement that works? There are four ingredients – communication, context, compliance and client focus.
Context
When a client first comes to see you, particularly in a personal law matter, they have come with a big problem that they are not able to handle alone. Their heads are full of emotional static and they don’t have a lot of bandwidth. It’s in this state that you need to talk to them about some very significant stuff:
- what the facts are
- what their goals are
- how long it will take and how much it will cost
- what’s going to happen along the way and
- your role in helping them.
This is a lot to take in. Legal services are a very complex consumer purchase.
While we all recognise that setting realistic expectations is important, all your words to your client in conference are wasted if you don’t give them a record of what you discussed and agreed to. This can be a letter – in a clear format as noted below – or even a brief video recorded on Loom, Zoom or Clipchamp (in the 365 suite).
The context of the matter is crucial. The client needs to understand that your scope of work and costs estimate is predicated on the baseline information and goals you know, and you also need to spell out the assumptions that you are making at that particular time. Set expectations that costs and scope of work will change if facts, goals and assumptions change. The scope of the matter should be based on the most likely outcome based on what you see at that time. It’s a good idea to let the client know what the costs might be if the matter progresses beyond the current scope in order to avoid update shock.
Communication
It goes without saying that we should write in plain English – short sentences, no legalese, active voice, etc. However, the accessibility of a document can hinder the client’s ability to understand it. An accessible document features headings that help with navigation, logical arrangement of topics, 10-12 size accessible font and double spacing. This format should apply to both your letters and your costs agreement. Think about whether you might want to add video explanations (for example, embedded Loom videos) if your client struggles with reading.
Compliance
Compliance with the costs disclosure requirements in your jurisdiction goes without saying. The compliance requirements are by and large reasonable – and can be met without too many excessive words and bulky format. The key is to understand the purpose of the disclosures and to weave in the required information in a way that makes logical sense to the overall agreement. Compliance is necessary but not sufficient and may not prevent a complaint if not accompanied by the right context and communication.
Client focus
The most important audience for the costs agreement is the client. Research by the Legal Services Board in the UK indicates that at the commencement of the matter, clients want to know
- who is their main contact
- what is the scope of the agreed work
- how much is it likely to cost
- how long will it take
- what they need to do next.
Bring this important information to the fore in your costs agreements and communications.
Make sure also that your client understands the key points in the document: have a conversation with them about the basis of the scope, the likely costs, what happens if things change. Talk about making payments, what will happen with billing, how you will pay for disbursements. Talk about the relationship – your mutual obligations of trust, disclosure and timeliness, and what to do if they are unhappy or unsure about anything. It’s not sufficient to send the agreement and get them to ask if they have any questions – discuss and ensure they understand and agree (s.174(3), Uniform Law).
A costs agreement can be a key way to build trust and confidence in the lawyer-client relationship. Context, communication, compliance and client focus are the key considerations.
Do you need help with your costs agreements?
I offer a fixed fee package that includes tailored costs agreements with collateral documents including a client information pack, covering letters, update letters and bills, compliant for your jurisdiction. Also included is a training session for your team where I share many tips and insights so they can understand how to engage well. Prices start at $3000 (+GST), with discounts for new and low bono law practices.
Book a discovery call here: https://lawyersfriend.com.au/contact/#book
Here’s what some of my clients say:
Cost agreements are such an important step in the client engagement process and can set the tone for the relationship moving forward, and ours were in need of a revamp. We engaged Jennie to help us with this process and could not be happier with the result. Jennie was easy to work with, efficient and her common sense approach and genuine understanding of the client-lawyer relationship meant that she was easily able to translate what we needed into functional client engagement documents. We cannot recommend Jennie highly enough.
- Kate Freshwater, Principal, Kate Freshwater Lawyers
Our Team engaged Jennie to undertake an update and refresh of our engagement process for our valued clients. Jennie’s experience and expertise were invaluable. We feel confident in the product that has been produced that it aligns not just with our values and vision but also meets all of the essential requirements of a client engaging our firm. The presentation provided to staff really assisted in bringing the whole team along the journey. Would highly recommend Jennie’s services to anyone who is in startup or growth phase.
- Michelle Oates, Principal, Connect Family Law
