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How Does a Retainer Fee Work?

How Does a Retainer Fee Work?

A retainer creates a duty between lawyer and client, but how do fees work? And how are they determined? Read this article to learn more.

23rd May 2019
Reading Time: 2 minutes

A retainer fee commonly refers to the upfront cost of a contract for professional services, such as with a consultant, freelancer or a lawyer. You put down a deposit, which the service provider will use to cover any costs involved in their legal services. A lawyer has special duties because of their unique position of influence over their clients. For example, lawyers must avoid conflicts of interest and disclose costs.

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What is the Purpose of a Retainer Fee?

When contracting a lawyer, a retainer fee will cover the various costs in a legal service. The fee is deposited into a trust account, ensuring it is used only for expenses related to your case. Essentially, the retainer fee protects the lawyer from incurring debt or having to use their own money to pay for a client’s costs, which can often be difficult to predict.

If the total costs are less than the retainer fee, you’ll receive any extra money back. If the cost is greater, you’ll need to pay the difference. The exceptions to getting the costs back is in a conditional agreement. For instance, the return of costs could depend on the outcome of the case.

Calculating a Retainer Fee

A retainer agreement determines the cost of the service based on the lawyer’s hourly rate, estimated time of the case and any other expected costs. You’ll get an invoice for any fees before they’re withdrawn from the trust account. If the costs are greater than the amount in the trust account, you’ll have to pay the extra amount.

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Special Duties in a Retainer

A lawyer has a number of fiduciary duties due to the special relationship of trust, including a duty to act in your best interest, disclose any costs that make up the retainer fee and extra costs as well as to avoid any conflicts of interest. The exception to cost disclosure is where the total costs are unlikely to exceed $750 and, moreover, if the total fees are less than $3,000 a short form disclosure only needs to be provided. Additionally, lawyers must not overcharge more hours than the case likely requires. If any issues arise, you’re able to terminate a retainer and receive your funds back.

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Shaheen Hoosen

Shaheen is a Legal Tech Intern at Lawpath as part of the Content Team. He is in his final year of a Bachelor of Laws with the degree of Bachelor of Information Technology (Major in Information Systems and Business Analysis) at Macquarie University. He is interested in IT Law and Access to Justice.