2013 looks set to be a crunch year for commercial real estate lawyers. While their fees raised to represent gyrating overheads, there now seems to be a broad acknowledgement the market cannot tolerate additional serial cost rises.
The going rateThe majority (56 per cent) of respondents to Canadian Attorney’s latest Legal Fees Survey strategy to freeze fees this season. This is really an important jump from this past year, when just one per cent indicated they would do so.
We’re also getting companies saying we used to use [ a bigger, more expensive law firm ] and now wish to downsize and are taking a look at firms that are far mid-degree.”
The belt-tightening by clients stems from concerns about dark economic growth forecasts, she believes. In April, the Bank of Canada sharply lowered predicted increase in 2013 by half a percentage point to 1.5 per cent. The economy isn’t anticipated to return to full speed until mid -2015, largely due to slow growth in China and also the European fiscal catastrophe that is protracted.
Many survey respondents appear to believe that, after several years of fee rises, the marketplace simply won’t put up with additional fee rises. A one practitioner respondent in Ontario said: “ There is so much I can charge my clients. I've to value my customers’ skill to pay.”, even as my overheads continue to grow A senior attorney in a rural area felt fees had hit on a ceiling,” while a lawyer in a midsized firm in British Columbia said: “we're pricing ourselves out of the reach of ordinary folks as well as their disputes.” One respondent from a company of over 100 lawyers said I presume fees will probably be static for some time now. We have to compete with in-house counsel.”
Yet, a substantial amount (41 per cent) of firms still aim to raise fees, though for the most part by just a relatively modest percentage. Higher overheads continue to be a major element in businesses’ decisions to increase fees, though some referred to the increased sophistication of their work, or also cited a desire to simply help impecunious clients.
Just three per cent of respondents plan to reduce fees; most stated they were doing so merely to keep customers.
Alibhai says customers continue to be willing to pay huge fees for market areas for example cases or intellectual property involving complicated litigation, but this is no longer the case for general, run-of-the-mill arrangements and contracts.”
Many clients are also needing structures that are different, with a few refusing to buy work unless it’s on a flat-fee basis, she says. This can be borne out in the survey, by which block fees limited hourly rates, means-tested, and contingency fees emerged as popular alternatives to billable hours.
Canadian Bar Association first vice president Fred Headon says a dual challenge is faced by firms; in addition to finding that fees have reached a saturation point that is “,” increasingly informed and sophisticated customers are being dealt with by them. Many clients now expect to pick and choose the work that’s being done, and have significantly more predictability in the prices they will have to tolerate he says. That’s additionally the conclusion of research, carried out included in the CBA’s ” which was unpublished at press time, “legal futures initiative.
Although this could be due to sample differences, hourly rates seem to have dropped overall since last year. Response rates for this year’s survey were lower than normal, with 179 firms taking part. The difference between one-year calls and five-year calls has widened since last year. In the year 2012, one-year calls -year calls. In 2013, it dropped to 75 per cent.
Headon says firms are comprehending fees need certainly to reveal the specific value of work done, which may require reducing the speeds of more junior lawyers. But this is “only the first step” in a set of more extensive changes, he says. “Clients aren’t just asking for a price that is cheaper but will request brand spanking new practices, for instance, calling for non-lawyer professionals, or work that is automated. They’re understanding that not everything has to be performed by a lawyer.”
Only three companies billed more than $500 for a preliminary consultation.
Views differed widely on the advantages of free consultations. A sole practitioner in Ontario said I 've found that offering free consultation fees brings in a lot of ‘tire kickers ’ — people shopping to find the best deal. You get people who are looking for legal advice and who more often than not keep you.” by billing to get a consultation Another respondent from a small company said fees were crucial to garner respect.” and to “weed out the customers who anticipate ‘freebie’ services” Others complained that folks often didn't show up for free consultations or that slashing the fee created a false expectation which other services will be very low price or free.
However, a respondent from a mid sized firm in Alberta said: “I believe [consultations] should generally be free as part of our mandate to serve the public,” while legal counsel from a small firm in Saskatoon thought the first half hour should be free “to let the clients gain trust in your abilities.”
Just over three quarters of firms responding to the survey had under five attorneys. Businesses with between five and 25 lawyers represented 13 per cent of respondents, and those with more than 25 attorneys represented 11 per cent of the total. In Ontario in 2013, we've only broken down fee ranges beyond national numbers: due to the response speed and by businesses with up to 25 attorneys.
Looking at companies with Ontario offices, some of the most commonly provided services seem to have seen price falls in the past year. For example, the average fee charged by the 56 businesses supplying services related to wills that are straightforward is $352, down from last year’s $396. For individual wills that are sophisticated, fees have gone down from couples and $937 to $797 ’ wills are 045 on average, compared with last year’s $1,392 .
Separation agreements are $2,439, down from $2,797. The 22 firms offering two days of civil litigation up to trial were charging $16,645 on average ’s $30,623 fall from 2012 substantial, a . Year-on-year amounts could possibly be affected by the more proportion of smaller companies in this year’s survey, though the same pattern is apparent nationally among businesses with between one and four lawyers offering family law services: Typical fees for uncontested divorces have dipped to $1,018 from $1,500 and for separation arrangements, $1,985 from $2,106.
Nonetheless, some wills and estates fees billed by the smallest businesses have noticed a slight rise to $337 from a mean of $330 for individual wills that were straightforward and to $734 from $705 for a sophisticated individual will.
Headon believes the monetary pressures, and also the requirement to alter pricing structures, are being felt by the full profession, while the precise fees it charges may affect. “The small firms are going to need to adapt as the large businesses,” he says. Smaller businesses lacking economies of scale may believe it is challenging to spend money on innovative systems that reduce overheads, but bigger businesses will even be challenged by the requirement handle that change efficiently and to “alter the direction of the boat”, he clarifies.
He points out there are external factors that, if tackled, would also help to bring businesses’ prices down. For example, increased government funding in systems aimed at increasing the efficiency of courts would mean instead of being forced to pick them up by hand, a cost and time saving that might be transferred to customers, litigators could obtain documents online.
Growing overheads, added to client pressure to reduce fees, are “putting a two sided pressure on the lawyers,” he says. “They’re becoming squeezed in the middle.”
Least places that are rewarding
Asked whether there were specific areas that were no longer profitable, some respondents mentioned small claims issues, legal aid, family law, and criminal law.
One lawyer planning to phase out small claims matters said: “Clients are advised to manage the issue directly and to use us.
But residential real estate was by far the place businesses had removed or were most prone to say they were phasing out. One respondent blamed time consuming regulatory burdens for “making it unwelcome to practise residential real estate,” calling certificate conditions that are new “insulting.” The most frequent reasons for phasing out residential real estate included low profit margins and also the high volumes required.
Tim Kennedy, vice chairman of the Canadian Bar Association’s property department that is real, says residential real estate fees have found little change since the late 1970s. “it'd appear the rates billed with mortgages for residential transactions look to be, from coast to coast, consistent. That’s been the rate for a substantial amount of time, so the fees being charged haven’t necessarily increased in line with the cost of living.”
In the sector there’s widely felt to be a “ceiling” in clients’ heads regarding what they’re willing to pay for residential property services, he says. Nonetheless, he indicates many customers may in reality be prepared to pay higher fees, given the sum of cash they may be already buying a property as well as the private, intensive temperament of the work that is legal. “It’s not merely preparing documents,” he says. “There’s a large amount of handholding and advice given.”
Companies with up to four attorneys last year billed $927 on average for residential property purchase, but $836 this season. Residential real-estate sale fees have slumped from $743, while residential property sale and purchase fees are $1,360, to $669 on average, compared with last year’s $1,505 .