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What is a retainer agreement?

Retainer AgreementAs an attorney, I often hear clients ask, “What is a retainer?”  Potential clients and existing clients of attorneys are often times misinformed when it comes to understanding what a legal retainer is and how it is used throughout the entirety of their legal case.

A retainer is the fee that the client pays when hiring an attorney to act on his or her behalf.  Typically, the attorney sets the retainer fee prior to taking a client’s case. When a client decides to hire an attorney to represent them in their legal dispute, the attorney will require the client to furnish adequate funds to meet the attorney’s set retainer amount.

Once the client pays the retainer fee, the attorney places the funds in the client’s trust account.  As work is performed on the client’s case, the attorney will deduct his or her expenses related to the case from the retainer, thus decreasing the amount of funds in the client’s trust account.  As the deductions from the retainer decrease the amount of the account, the attorney may require the client to replenish their retainer to ensure the attorney has sufficient funds to adequately represent the client.

The practice of law is a service-based industry and an attorney’s time is his commodity. Attorneys use retainers to solidify the fact that once hired, the attorney now represents the client and will operate off of the client’s retainer account. The retainer allows the attorney to provide necessary services to obtain the client’s goals, including determining and executing an appropriate strategy and plan of action in reaching a client’s goals through various functions. For example, it is very likely that the client will be billed for legal research, drafting of pleadings, telephone and in person conferences, drafting and reviewing emails, telephone conversations with opposing counsel, preparation of discoverable documents, investigation of facts, preparation for and appearances in court, correspondence with the court, and other tasks necessary to adequately handle the matter in controversy. The attorney’s time involved in out-of-office representation will be measured from the time the attorney leaves the office until the attorney arrives back at the office.

The following fees are examples of expenses that will be deducted from the retainer: court fees, duplication fees, filing fees, facsimile fees, and postage fees.  Larger expenses such as travel expenses, long distance telephone expenses, accountant’s fees, appraiser’s fees, consultant’s fees, other professional fees incurred on the client’s behalf (including specialized or local legal counsel), and other disbursements will be in addition to the retainer amount. Thus, the client will have to bear the cost of those fees separately from the attorney’s retainer amount.

The retainer amount and the process by which the attorney’s firm uses or spends the client retainer amount is normally discussed simultaneously with the explanation and signing of the retaining contract for hire with the attorney or the attorney’s firm.  The contract should explain in detail how the retainer will be used, as well as, when and how the client’s money will be drafted from the retainer account.  Retainers are property of the client and the client’s funds only, not the attorneys. The attorney only receives the amount of the retainer in which the attorney earns by working on the case.  Once the case has been resolved, the attorney should return any remaining retainer funds in the client’s trust account to the client.

Quick Example:

If the retainer is $5,000 and the attorney and her staff expend 5 hours at a rate of $300.00 per hour preparing, conferencing, drafting, and filing the original answer and the counter petition then the client should expect that a total of $1,500.00 of work was performed on the case, thus leaving a total of $3,500.00 left in the clients retainer fund. If filing an original petition for divorce, the client must also consider filing fees at around $400.00 and service fees for the process server of approximately $100.00. Those fees would be subtracted from the retainer amount as well, leaving the client retainer fund with about $3,000.00. It is important for the client to understand that the retainer is an initial deposit and will likely have to be replenished before the suit is resolved.

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