How to control the cost of legal advice for your business

The cost of legal work for a business depends largely on decisions made at the start of a matter: how the work is priced, how precisely its scope is defined, who carries it out, and what form the advice takes. You can discuss each of these with a solicitor before you instruct them. This article explains them in turn, then sets out five things to ask for at the start and some practical ways to keep the cost down once the work is under way.

Solicitors in England and Wales must give clients the best possible information about how their matter will be priced and its likely overall cost, both when they are instructed and as the matter progresses. That is a requirement of the Solicitors Regulation Authority's Code of Conduct, and it gives you a sound basis for asking detailed questions about cost before you commit.

How legal work is priced

There are four common ways of charging, and a solicitor may use more than one on the same matter.

• Hourly rates. The solicitor records the time spent on your matter and charges it at an agreed rate. This suits work whose extent cannot be predicted, such as a dispute in which much depends on how the other side behaves. You should still receive an estimate of the total and be told if it is likely to be exceeded.
• Fixed fees. A set price for a defined piece of work, such as preparing a shareholder agreement or reviewing a lease. A fixed fee gives certainty as long as the scope is agreed precisely, because work outside the scope is usually charged separately.
• Capped fees. Time is recorded, but the charge for the agreed work will not go above a set figure.
• Staged fees. The work is divided into stages, each with its own fee or estimate, so that you can decide at the end of each stage whether to continue. This often suits disputes and transactions.

Whichever basis applies, the letter confirming your instructions should say whether the figures include VAT, and list the disbursements you will pay in addition, such as court fees, search fees, Land Registry fees and any barrister's fees.

Defining the scope

A precise scope is what makes a fixed fee possible and keeps an estimate reliable. An instruction to "review this contract" could mean a short note of the main risks, or a full mark-up followed by a negotiation with the other side, and the cost of the two is very different. A better instruction names the document, what you need to know, what you want back and by when: for example, "review the supplier's terms, advise on liability, payment and termination, and prepare a mark-up we can send to them by Friday".

The engagement letter should record the scope in terms specific to your matter and list what is not included. If the work later needs to go beyond that scope, you should be told before the extra work is done and asked to agree the additional cost.

Who does the work

Legal work is often shared between solicitors with different levels of experience, trainees and paralegals, each with a different charging rate. Giving routine tasks to someone with a lower rate can reduce the cost, provided the work is supervised and the person advising you understands your business. Before you instruct a firm, ask who will do the work, what each person charges and who supervises them, and ask for the name of the person with day-to-day responsibility for your matter to be included in the engagement letter.

Getting advice you can act on

Advice is most useful when the solicitor knows what you are trying to achieve and the constraints you are working within. Explain the commercial background: why the contract matters, what you can and cannot accept, your budget and your deadline. Then ask for the advice in the form you need. For a contract, that may be a marked-up draft with a one-page note of the main risks. For a dispute, it may be a short summary of your options, the likely cost of each, and the solicitor's recommendation.

Where a decision depends on your own judgement of risk, the advice should set out the options and the main risks of each, and say which option the solicitor recommends and why. If a recommendation is not included, ask for one before you decide.

Five things to ask for at the start

1. A price or an estimate in writing. For defined work, ask whether a fixed fee is possible. Where it is not, ask for an estimate for each stage and what could make the cost higher.
2. A written scope. Ask for the engagement letter to state what is included and what is not, in terms specific to your matter.
3. The name of the person doing the work. Ask who will handle the matter day to day, who supervises them, and how you can contact them.
4. A recommendation. Ask for the advice to end with what the solicitor recommends you do, and the main reasons for it.
5. A view on what you could do yourself. Some tasks, such as collecting documents, preparing a timeline of events or chasing a customer for payment, can be done within your business at no legal cost. Ask which parts of the work these are.

Keeping the cost under control once work starts

Much of the time spent on a matter goes on gathering information and correspondence, and the way you provide information affects how long that takes. Send documents together, organised and labelled, with a short timeline of events, rather than forwarding emails one at a time. Collect your questions and send them in one message. Have one person in your business give instructions, so that the solicitor is not working from different views within the same company.

Ask to be told when the cost reaches a set proportion of the estimate, such as three quarters, so that there is time to discuss the next steps before the estimate is exceeded. Read each invoice when it arrives and raise any question promptly, while the work is recent enough for both of you to remember it.

If you are unhappy with the service or a bill

Raise it with the solicitor first. Firms regulated by the Solicitors Regulation Authority must tell clients in writing, at the start of a matter, about their right to complain, how to complain and to whom, and about their right to take a complaint to the Legal Ombudsman. The Legal Ombudsman normally expects the firm to have had up to eight weeks to resolve a complaint before it will look at it.

What value means in legal work

Value in legal work depends on the price and on whether the advice is correct, arrives when you need it, is proportionate to what is at stake, and is in a form you can use to make a decision. Agreeing the pricing basis, the scope and the person responsible at the start of a matter makes each of those more likely.

If you would like to discuss a matter with us, send us a short summary and we will arrange a call with one of our solicitors. We set out the scope and cost of the work in writing before we start.

This article is one solicitor's view and general information, not legal advice — always take advice on your own situation before acting. AD Solicitors is a trading name of AD Solicitors Limited, a recognised body regulated by the SRA (no. 8011228).