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Publicising solicitors' charges - archive version

25 August 2010

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This practice note advises on how solicitors should their charges without breaching the Solicitors Code of Conduct.

1. Introduction

1.1 Who should read this practice note?

This practice note should be read by all solicitors who publicise their charges. It is particularly relevant for solicitors carrying out conveyancing work.

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1.2 What is the issue?

Some solicitors publicise their services using 'headline' prices, which represent the charge for a given service. This applies to the publication of all cost information, including quotes, adverts, online services and client care information. Some solicitors are unclear as to what must be included in headline prices. Potentially misleading cost information may also arise where additional charges are later 'bolted on', or where items are referred to as 'disbursements' when they are not.

It is important that solicitors do not mislead prospective clients by giving them a false indication as to the likely cost of their professional services.

The Solicitors' Code of Conduct (the Code) sets out specific rules as to the way in which solicitors should publicise charges. This practice note aims to clarify how you should publicise your charges without breaching these rules. The Conveyancing Handbook also refers to your conduct in this respect.

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2. Providing clear and accurate information

Clients should not be led to believe that costs are likely to be less than they will be and headline prices should be presented in a manner that enables 'like for like' comparisons in terms of cost information, with breakdowns of charges where appropriate

2.1 Publicising fixed and estimated charges

Publicising your charges should help your clients make an informed decision as to whether to instruct your firm based on what the final charge is likely to be. Failing to provide the appropriate level of detail may be considered to be misleading, and you would be in breach of your rule 1 duties under the Code to act in the best interests of your client.

Rule 7.01 of the Code states that you must ensure that any publicity provided by must not be misleading or inaccurate. Rule 7.02 , together with the appended guidance notes, deals specifically with charges, and states that publicity relating to your firm's charges must be clearly expressed, and it must state whether disbursements and VAT are included in the quoted sum.

To avoid breaching these rules, you should avoid publicising the following:

  • Estimated charges pitched at an unrealistically low level;
  • Additional 'sundries' or 'catch all' amounts for such without providing details about the purpose of the charges;
  • Estimated or fixed charges plus disbursements, if expenses which are in the nature of overheads are then charged as disbursements (see section 5); and
  • Estimated or fixed charges for conveyancing services which may require additional charges for work on a related mortgage loan or repayment, including work done for a lender, unless the publicity makes it clear that additional charges may be payable (e.g. by including a clear statement such as 'excluding VAT, disbursements, mortgage related charges and charges for work done for a lender').

These terms apply to all publicised costs, including those publicised via the internet and online services.

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2.2 Publicising free, discounted and pro bono work

Offers of discounts could be misleading if clear details of rates are not included. Similarly, you must only publicise services as being 'free' if they are not chargeable, rather than being conditional upon other factors such as receiving further instructions or other benefits.

If you publicise work as being carried out on a pro bono basis there must be no charges billed to the client, except where a conditional fee agreement is used and the only charges billed are those which your firm receives by way of costs from the client's opponent or other third party, and which are paid to a charity under a fee sharing agreement.

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2.3 VAT and disbursements

When giving an estimate or quotation for charges, you should make it clear to your client whether or not VAT is included in the quoted sum. Quotes should be as comprehensive as possible and should be clear as to whether VAT and/or disbursements are included. Where VAT is not mentioned, it should be presumed that the sum is VAT inclusive.

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2.4 Advising your client on the basis of cost information

Where you have made it clear in your headline price that it does not represent a fixed charge and excludes certain charges, rule 2.03 of the Code requires that you give your client the best information possible about the likely overall cost of a matter both at the outset and, when appropriate, as the matter progresses. In particular you must:

  • Advise your client as to the basis and terms of your charges;
  • Advise your client if charging rates are to be increased; and
  • Advise your client of likely payments which you or your client may need to make to others.

Failure to observe these standards may be regarded as providing inadequate professional services by the Legal Complaints Service.

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2.4.1 Referral fees

Where your client has been referred under an agreement authorised by rule 9.02 of the Code (Referrals of business), you must provide all relevant information concerning the referral to your client, in writing, including the amount of any payment to an introducer.

Where an introducer pays you to provide services to the introducer's customers, you must inform your client of the amount paid for your services, and the amount that the client is required to pay the introducer. Written notice should also include a statement that advice given will be independent, and confirm that information disclosed by the client will not be disclosed to the introducer unless consent is given.

Your client should not have to pay any costs as a direct consequence of a referral. If charges are increased as a result of a referral, you should advise your client as to whether it is in their best interests.

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2.4.2 Estimates and fixed charges

You should make it clear that an estimate for charges is not a fixed price - unless it is your intention to charge a price which will not be altered in any circumstances. In such an event, you must not increase charges to your client at a later stage, notwithstanding unforeseen complexity or expense.

You should be mindful that overcharging your client may be deemed professional misconduct. When providing a quote that is not fixed, you should warn your client that if unforeseen complications arise, the estimate may be revised. You should also advise your client that a quotation will be valid for a fixed period, upon the expiry of which you may issue a revised quotation. You should include this information when publicising charges, to avoid misleading your clients

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3 Disbursements

3.1 Definition

'Disbursements' are defined by the Solicitors' Accounts Rules 1998 (SAR) as any sum that you spend or are going to spend on behalf of your client or trust, including any VAT element (SAR 2(2)(k) ).

You must not charge for items as disbursements when they do not amount to such. You must also refrain from increasing the amount of a disbursement by adding on an element of fees while representing the total amount as a disbursement. The information you provide should be clear to enable clients to make an informed decision. For example, you should be clear about what amounts to the headline figure, as well as any other fees and disbursements. It should also be clear what any other fees relate to so that a client can understand if another solicitor has included it in their headline figure.

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3.2 Disbursements routinely included in conveyancing transactions

You should clearly cite any disbursements that you perceive to be routinely included in your publicised price. What amounts to such disbursements is not defined in the Code or The Conveyancing Handbook, and may differ depending upon the type of work that your firm carries out, but the payments are those that you are likely to make on your client's behalf as part of the normal course of business when providing a given service. They are likely to include:

  • Local and other search charges - pre-exchange and pre-completion (these charges should be accurately reflected in any estimate of cost);
  • Charges billed to your firm by a financial institution for executing a transfer of funds. This may be via CHAPS, BACS or FP (future payment). If you include an additional administration charge, you must make it clear that this is part of you fees; you must not refer to this element as a disbursement;
  • Land registry charges;
  • Official copy entries obtained from the Land Registry.

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3.3 Additional charges

Items that relate to your firm's charges are not disbursements and should not be described as such. These items are typically part of a normal conveyancing transaction, or form part of your firm's overheads. Minor expenses such as postage and telephone costs should therefore be included in any estimate of cost.

3.3.1 Fees

Generally, additional charges may be identified by those which amount to your fees, and those which are your firm's overheads, as detailed below:

  • Administration charges for arranging searches
  • Fees when acting for the lender. Where applicable, you should:
    • state that it is not possible to provide full details at the outset, but that the client will receive that information when the mortgage offer is made
    • indicate that there will be a charge according to what the lender instructs
     
  • Fees for preparing the Land Transaction Return Form in respect of Stamp Duty Land Tax (SDLT). If this is going to be charged separately then the charge must be made clear in all publicity and cost information
  • File storage.

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3.3.2 Overheads

You should not include these elements as additional charges that are passed on to your clients. Examples include:

  • Petty charges such as postage, photocopying and faxes; and
  • Professional indemnity insurance.

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3.3.3 Other charges

Some charges may not be foreseeable, and may only become apparent on instruction. These charges vary between cases and may be impossible to predict. In relation to leaseholds for example, you may not be able to gauge the following:

  • Managing Agents charges;
  • Notice fees;
  • Deeds of covenant; and
  • Service charges.

Where possible, you should make reference to the potential for there to be additional charges. For example, it might be appropriate to state that you will charge extra for leasehold conveyancing, and to provide examples.

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4. More information

4.1 Legal and other requirements

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4.2 Further products and support

4.2.1 Practice Advice Line

The Law Society provides support for solicitors on a wide range of areas of practice. Practice Advice can be contacted on 0870 606 2522 from 09:00 to 17:00 on weekdays.

4.2.2 Law Society publications

4.2.3 Other resources

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4.3 Status of this practice note

Practice notes are issued by the Law Society for the use and benefit of its members. They represent the Law Society's view of good practice in a particular area. They are not intended to be the only standard of good practice that solicitors can follow. You are not required to follow them, but doing so will make it easier to account to oversight bodies for your actions.

Practice notes are not legal advice, nor do they necessarily provide a defence to complaints of misconduct or of inadequate professional service. While care has been taken to ensure that they are accurate, up to date and useful, the Law Society will not accept any legal liability in relation to them.

For queries or comments on this practice note contact the Law Society's Practice Advice Service.

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4.4 Terminology in this practice note

Must - a specific requirement in the Solicitor's Code of Conduct or legislation. You must comply, unless there specific exemptions or defences provided for in the code of conduct or relevant legislation.

Should - good practice for most situations in the Law Society's view. If you do not follow this, you must be able to justify to oversight bodies why this is appropriate, either for your practice, or in the particular retainer.

May - a non-exhaustive list of options for meeting your obligations. Which option you choose is determined by the risk profile of the individual practice, client or retainer. You must be able to justify why this was an appropriate option to oversight bodies.

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