What a Lawyer Costs

Getting legal advice usually costs money. Legal fees can be expensive, but there are ways you can control costs and still get good advice. One of the best ways to think about costs for legal services—especially if you are spending up front to do strategic legal planning—is to think about legal counsel as a type of insurance policy. This makes sense because up-front investment in legal counsel is designed to prevent or significantly decrease the cost of a future farm business disaster in terms of both money and time.

You can start by understanding the different ways that lawyers bill for their services. Below is some lawyer fee lingo to know:

Fixed Fee or Flat Fee

Some lawyers will charge a fixed or flat fee that covers the cost of everything related to providing one particular legal service. For example, a business lawyer might charge $2,500 for everything related to setting up a farm business LLC, including drafting documents and time spent talking or emailing with a farmer client. Or, an estate planning lawyer might charge $4,000 for everything related to setting up an estate plan (will and trust, for example) for a farming couple.

A flat-fee service, even though it might cost more up front than an hourly service, can reduce the anxiety you might feel about taking the time to meet with or talk on the phone with a lawyer. With a flat fee, you can feel more comfortable taking the time to get your questions answered instead of watching the clock. A flat-fee service also can allow you to appropriately budget for a particular legal service because you will know the entire cost up front instead of being surprised by a big bill at the end of the project.

Unfortunately, fixed- or flat-fee services don’t work with all types of cases or in all circumstances. Where a situation is more complicated than the typical case or involves some uncertainties (like an opposing party or approval from a town), a lawyer is less likely to offer a pure fixed- or flat-fee service. Flat fees usually work best for business planning services, like drafting a farm lease, creating an entity, or reviewing a contract.

Hourly Fees

Hourly fees are the standard way that lawyers have historically charged for services. Generally, lawyers multiply their hourly rate (for example, $250/hour) by the number of hours they work on your behalf. The typical way to do this is to charge in six-minute increments. So if it takes a lawyer 20 hours to do everything related to a farm sale (talk with the farmer-client about their goals, draft a farmland purchase agreement, discuss the draft with the client, negotiate the deal with the landowner, make changes to the agreement as necessary, etc.), then the cost to the farmer client would be $5,000. And if the lawyer takes 20 hours and 30 minutes to do that same work, it will cost $5,125. You should also know that lawyers generally round up when billing, so, for example, seven minutes will equal a charge of two tenths of an hour (.2) or $50.00.

Hourly fees can add up quickly, and knowing that your lawyer is billing by the hour can understandably make you wary of spending the time needed to get all of your issues raised and questions answered. Also, while most lawyers will give clients an hours estimate for a particular service, these are only estimates and generally not a guarantee. That being said, you should expect to be given advance notice by your lawyer if they see the writing on the wall and realize that their initial estimate was too low. Further, for a variety of reasons, lawyers will often “write down” their time by reducing or eliminating certain time charges.

Fee Caps

Some lawyers offer fee caps, which are a combination of a flat fee and hourly concept. A lawyer might offer a particular service at an hourly rate, but might cap the number of hours spent at a certain number. So a lawyer might say they will set up an LLC for you and charge hourly, but they will agree to cap the fee at 10 hours. That way, you know the cost could be less than 10 hours but definitely won’t cost more than 10 hours at the lawyer’s hourly rate. Fee caps are one way to keep a lid on legal costs, and are becoming increasingly common, but fee caps still don’t generally encourage open farmer/client communication in the same way as a flat fee.

Subscription Services

Some lawyers offer subscription services, where a client pays a set amount of money per month in exchange for some set of legal services. The amount and type of services available vary from lawyer to lawyer. Farmers could pay a small amount per month for unlimited access to talk to or email a lawyer with questions, but could pay extra for any actual legal services (potentially at a discount). Alternatively, a farmer could hire a lawyer at a flat rate per month to provide certain services over the course of a year (like legal services associated with starting a new farm business—entity formation, employment counseling, trademark, lease agreement, etc.).

Retainers

Retainer fees are fees that a client pays up front to a lawyer before the lawyer has begun work for the client. It’s important for farmers to understand the role of the retainer. Sometimes it is used to pay the monthly bill, but sometimes it’s not. Sometimes the retainer is meant to cover the lawyer’s costs in case the client does not pay bills on time.

If a lawyer asks for a retainer, you should understand exactly how it will be used. Retainers are more common in a litigation (court) setting, where fees can add up quickly and unexpectedly.

Contingency Fees

In limited situations (usually if a lawsuit needs to be filed and there is a good possibility of winning a significant monetary settlement or award), lawyers might offer to represent you for free in exchange for a large chunk of the winnings. This is called a contingency-fee arrangement, and the lawyer’s contingency fee might be 30 percent or more of any settlement or award. Contingency fees are almost never used for legal services related to farm business planning.

Now that you understand lawyer fee lingo, below are some of the ways to control legal costs:

Ask for a free consultation

Many lawyers offer an initial free consultation, usually for about 30 or 60 minutes. The consult might be by phone or in person. You can use this time to get to know the lawyer, see if you feel comfortable with them, and see if the lawyer seems to understand your farm operation and the legal issues you need to address.

Ask for an estimate

Especially if you are talking to a lawyer about business issues or farm succession planning, an experienced lawyer should have at least a ballpark idea of how much time it will take to handle your matter (LLC formation, estate planning, lease review, etc.). You can tell a lawyer that you authorize them to spend the time up to that estimate but no more without talking to you. You can also ask for a flat fee for the entire service up front.

Ask for top priorities

If you are heading to a farm business lawyer for the first time, they may have a laundry list of legal items that you should address. Ask the lawyer to help you prioritize your business’s legal needs. Ask which legal issues you need to address immediately, and which can wait until later. In general, the highest priorities should help protect you from big losses or add big value to your business—or both.

Ask about how your lawyer bills clients

Be comfortable asking your lawyer about their billing philosophy. If you are hiring a lawyer by the hour, ask them how they bill time. Lawyers generally bill for part of an hour, often in 6-minute increments (tenths of an hour). Will the lawyer bill for every call and email at .1 hour (6 minutes) no matter what, even if they only spent 30 seconds talking to you? Or do they only bill for work that moves your matter forward? Small amounts of time can increase costs quickly.

Payment plans

Be aware that many lawyers will offer a payment plan or delayed payments that track with farming cash-flow schedules. In order to make this work, however, you need to communicate with your lawyer. You need to ask directly for a payment plan. Simply not paying your lawyer’s bill without talking to them can damage your relationship with your lawyer.

Moreover, it is common practice for a lawyer, in a representation agreement, to reserve the right to charge late fees or apply the retainer to outstanding balances. Most lawyers don’t like to use these tactics and would much prefer to work something out with the client.

Aren’t there free legal services for farmers?

Yes, in many states. However, the services available are often limited in scope and limited by farmer income levels. It’s never a bad idea, though, to contact trusted farm organizations for referrals to potential free legal services. Additionally, it’s possible that if you work with a nonprofit organization or foundation on, for example, a conservation easement or farm purchase, you might be able to have legal fees covered as part of the grant funding that the nonprofit or foundation might provide.

Budget for legal services

It’s a great idea to include the cost of legal services in your farm business plan, just as you would for other inputs, like marketing and equipment. You can always use a free consultation with a lawyer to find out what legal needs you should prioritize and to get an estimate of the cost for those priorities.