Why are commercial property solicitors so slow and expensive?

Commercial Property SolicitorsAt the risk of being lynched by my fellow professionals, I thought you might be interested to hear why most commercial property solicitors are so slow and expensive.  In short, it is because they are paid by the hour.   This means that the solicitor is not incentivised to work as quickly as possible.  In fact, he due he is incentivised to do the opposite.

This is reinforced by the fact that he is paid an hourly rate and that he or she works to strict billing targets which usually incorporates a billable time target eg. each “fee earner” must log 5 and a half billable hours per day.   The team leader will be given a report which shows which fee earners are not achieving this billable time target.   Repeated failure to hit the billable time targets could lead to the fee earner having his pay frozen, reduced or he may even be laid off.

Commercial Property Solicitors

It is also common practice in law firms for a low fee estimate to be given to the client to “get the job in the door “and then as the deal unfolds (and this is covered off in the initial terms of business letter so the client has no comeback on the law firm), the estimate is revised to take into account the additional work that is involved or the increased complexity or to reflect protracted negotiations.  So the figure is massaged upwards.

What effect does this have on the client?   Well, apart from feeling misled, this wreaks havoc with the client’s budgets.   Most commercial property solicitors fail to realise or appreciate fully the way that a particular project, such as opening a new office, shop or factory, is approached in large companies. The project is carefully planned and a detailed appraisal is prepared with accurate costings attached to it.   This is planned may be years in advance of the actual project occurring.  The funds are put aside so that there are no nasty shocks for the shareholders or stakeholders of the business.   If the project then runs wildly over budget due to an increased legal bill, someone in the company is going to have some explaining to do and may be criticised or may even have their position threatened within the company.   This is all because the commercial property solicitor’s estimate proved inaccurate.

Now in my experience of working in the City and in large regional law firms, what often happens is the commercial property solicitor will phone the client before submitting the bill and there is a bit of a horse trade between what is on the clock ie. what the lawyer has time recorded on that matter and what bill the client could live with and a deal is struck somewhere between the recorded time and the original fee estimate.   Clients are getting fed up of this haggling and commercial property solicitors hate doing it.  Everyone ends feeling slightly aggrieved.

The trouble is in large law firms, it is really hard to write-off time which has been logged on the system.   Most law firms would not allow a write-off of time without the sanction of a team leader or department head.    This adds to the pressure and incentive on the lawyer to recover as much of the recorded time as possible.  Stories circulate in law firms about the danger of double discounting ie. Where the original fee estimate is rounded down by the client at the outset and then the lawyer further discounts the job at the billing stage in the horse trade referred to above.

Is there an alternative to this unsatisfactory process?   Many clients are now getting wise to these practices in law firms and are demanding fixed fees.   Fixed fees have been standard in residential conveyancing for some time now and are popular for clients trying to budget for the large expense of buying a property.

The days of time recording and billing targets are coming to an end.  The legal profession needs to clean up its act and enter the real world.  When the likes of Tescos and the Co Op enter the market next year, solicitors are in for a rude awakening.   Demand fixed fees on all commercial property transactions from your lawyer.  Do not be fobbed off with stories that the transaction is too complicated to be fixed fee or it is too early to give an accurate figure.  Tough.   Quote a fixed fee or lose the job to a law firm that will quote a fixed fee.   Fixed fees are the way forward.   They incentivise the lawyer to get the job done as quickly as possible because the lawyer does not get paid until the job is done.  They incentivise the lawyer to stop petty point scoring and to be more commercial and pragmatic.  They incentivise the lawyer to get his fee quotes more accurate.   They may even incentivise law firms to scrap time-recording as a way of billing clients.

Perhaps clients would be happier to pay according to the value of the deal to that company rather than the amount of time it takes.  So if a particular property deal is going to net a client a cool £1m in net profit, then the lawyer could take a percentage of that but if it is just a bog standard licence to occupy, then a low fixed figure will be appropriate.

Commercial Property Solicitors

Beeton Edwards Solicitors is a fixed fee law firm for commercial property transactions.   We give the client a fixed fee for the job at the outset and if we get that fixed fee wrong, then that is our problem not the clients.  Further more if the transaction aborts in circumstances beyond the control of the client, there is no fee to pay.    Beeton Edwards Solicitors is a niche property law firm which was set up in June 2008 and has built its reputation on these principles and in these tough economic times, this message has been like manna from heaven for clients.

Contact Dominic Beeton on 02380 382 850 or via email dominic@beetonedwards.co.uk for more details of our commercial property fixed fee / no win no fee deals.

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Dominic Beeton, Solicitor
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