What is a lawyer retainer fee?

A “retainer” is an amount of money a client pays an attorney before the attorney begins working on the client’s case.  The payment solidifies the fact that the client and attorney are working with one another, and it allows the attorney to meet the expenses of running the office, conducting legal research, investigating the client’s case, and doing other things on behalf of the client.  It also helps the client to meet the costs of hiring the attorney by breaking up the bill into smaller amounts that the client can pay over time.

A lawyer retainer fee is usually based on a written agreement, signed by both the client and the attorney.  The written agreement establishes the amount of the retainer fee, what the attorney must do with the retainer when she receives it, and what sorts of things the lawyer may use the retainer to purchase. If the client agrees that part of the retainer may be used to pay costs—that is, out-of-pocket expenses other than attorney fees, such as money paid for photocopying and court fees—the agreement should state this.

The same agreement usually sets forth other aspects of the attorney-client relationship, such as why the attorney is representing the client and what the client’s goals are.  Before a client signs the agreement, he should read it carefully and ask any questions that the agreement raises for him.

When an attorney receives a retainer, most state ethics rules require the attorney to place the money in a trust account.  The attorney can only take the retainer out of the account if she has actually earned the money by doing work for the client.  Most attorneys send their clients written bills or financial statements from time to time that show how much of the retainer the attorney has already earned by doing work and how much is left.  If the client decides to fire the attorney before the attorney has earned the entire retainer, the attorney is generally expected to return the un-earned portion to the client.

Once the retainer fee is used up, the attorney may bill the client in one of several ways.  The attorney may charge her usual hourly fee, or she may enter into a contingency fee agreement with the client. Contingency fee arrangements provide that the client doesn’t pay any additional fees unless his case comes out in his favor.  The attorney and client will usually discuss these payments and put them in writing before the client pays the retainer.

Retainer fees are also used when a client needs to hire an attorney for a long-term relationship. For instance, many businesses have an attorney “on retainer” in case legal issues come up in the course of the business’s everyday work. These retainer fee arrangements usually consist of a fixed amount that the business pays the attorney every month in exchange for the opportunity to contact the attorney whenever the business has a law-related question. In these cases, the retainer provides a cheaper and more efficient alternative to hiring an attorney to work full-time “in house.” For example, a physician’s office may have an attorney on retainer so that the physician or his employees may call the attorney whenever a patient threatens to sue or the office’s manager has a question about privacy laws, Medicare, human resources, or any other law-related issue.

Individual clients may also hire attorneys on retainer, but it is more common for businesses to do so.

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