New Report on Legal Fees…

Michael CarabashThe following passages were taken from Dynamic Legal Forms new report on legal fees in Toronto, which can be found here:

I am a lawyer. It wasn’t easy getting here. I spent 7 years and $100,000 going to university to get 3 degrees. I passed the Bar exams, articled for 10 months, and then started my own law practice. But now that I’ve finally become a member of an esteemed profession, I find myself dealing daily with a negative stigma left by lawyers gone and perpetuated by lawyers present. That stigma, as I’m sure you’ve guessed, is legal fees (as characterized by the billable hour) and it’s left a bad taste in the public’s mouth.

The billable hour, perhaps the defining and most contentious issue surrounding legal services, is relied on so heavily because lawyers don’t really know what their services are worth and have little experience in estimating the total cost of such services. There are many unknown variables which can complicate matters and cause initial time estimates to become meaningless.

Yet the billable hour is an antiquated and unsatisfactory valuation method. It deprives clients of predictability over the costs of legal services. At the same time, it provides the wrong financial incentive for lawyers to continue working on files (e.g. litigation lawyers who settle disputes early on become poor, while those who drag their feet become rich). The billable hour can also create other ethical and professional problems within the lawyer-client relationship (e.g. lawyers pad their dockets or fail to keep clients informed of the running bill). It is also to blame for lawyers’ work-life imbalance (i.e. working 14 hours a day to bill 8 hours). Finally, valuing legal services according to the time a lawyer spends working on a file stifles innovative billing methods which would otherwise allow more people to (perhaps simultaneously) access legal services from that
same lawyer.

With the emergence of new technologies (e.g. request for quote processes through Dynamic Legal Forms) beginning to penetrate the mainstream legal services industry, trends towards commoditization and unbundling will expand. Consumers of legal services will rely more and more on technological mediums such as e-mail, internet, smart phones, social networking websites, etc., to shop around for the best deals. They will look for value-added services from reputable, accessible, and affordable legal service providers; they will also expect to be able to compare the total costs of such services.

In doing so, this new breed of client will create opportunities and competitive advantages for those lawyers who leverage technology to promote themselves and deliver cost-effective legal services to the masses. It is in this new paradigm that the billable hour in its current form may evolve to have a much lesser role to play in valuing legal services or cease to exist entirely.

With these things said, I wanted to know the current state of legal fees in general – and the billable hour in particular – in Toronto, Ontario, Canada. As such, the purpose of this report was to survey 500 solo/small firm Toronto lawyers to help answer the following 7 questions:

  1. How prevalent is the billable hour?
  2. What was the average hourly rate?
  3. How does that rate change based on experience and primary legal area practiced?
  4. What was their average initialconsultation fee?
  5. How many provided a free initial consultation in some form?
  6. What was the average legal fee for certain basic services?
  7. What alternatives to hourly billing do they offer?

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