1.1 Who should read this practice note?
This practice note is relevant to all those who are involved in client care.
1.2 What is the issue?
The Solicitors Regulation Authority (SRA) implemented outcomes-focused regulation (OFR) in October 2011. OFR is a move away from a rules-based approach to one that focuses on high-level outcomes governing practice and the quality of outcomes for clients.
The SRA has published a Handbook, which sets out all the SRA's regulatory requirements. It outlines the ethical standards that the SRA expects of practices and practitioners and the outcomes that the SRA expects them to achieve for their clients.
The SRA Handbook includes a Code of Conduct (the 'SRA Code'), which replaced the Solicitors' Code of Conduct 2007 (the '2007 Code'). The SRA Code establishes outcomes-focused conduct requirements and each chapter outlines outcomes and indicative behaviours (IBs).
The SRA Handbook and Code has been in force since 6 October 2011. Accordingly, the 2007 Code and all of its rules and guidance no longer apply to solicitors' conduct, save in respect of any review by the SRA of conduct taken prior to 6 October 2011 to which the 2007 Code will still be applied.
An overview of OFR can be found on the Law Society's website. This provides information on what the SRA Handbook contains, including a summary of the chapters in the Code of Conduct and a summary of the reporting requirements included throughout the Handbook.
Many clients are not regular users of legal services provided by solicitors. In addition, a solicitor is often instructed while the client is experiencing a stressful situation. The primary issue for the client is a successful resolution of their legal problem or completion of their transaction. Specific details around costs and what services you will provide to them can often be considered as secondary by the client until a problem arises.
To help focus the client on the exact parameters of a retainer, solicitors often provide an initial letter to the client, called a client care letter, along with any terms of business. While there is no requirement to provide such a letter, clients may find it helpful to have some information written down so that they can refer to it at a later date. This written information may also be used as evidence against complaints of insufficient information or inadequate professional service. However, if the information is unclear or important details not highlighted tothe client then their value will be limited. It should be noted that there is a small amount of information that must be provided in writing.
Even with knowledgeable or regular users of legal services, you should still ensure the exact scope of the retainer is recorded to limit the potential for disputes.
2 Treating clients fairly
The first outcome in chapter 1 on client care of the SRA Code is that you treat your clients fairly. This outcome should always be kept in mind when considering what information you provide your client, both at the start of a retainer and throughout. As noted above, providing information in a written form can be helpful. However, it is important that clients can understand the information they are provided with and that significant information is highlighted to them and explained clearly. You should consider your client's needs and circumstances when you decide what information to provide them and the manner in which it is provided. In particular, you should consider whether your client is vulnerable or has any special needs.
Outcome 1.12 in chapter 1 requires that clients must be in a position to make informed decisions about:
- the services they need
- how their matter will be handled, and
- the options available to them
While much of the information given in the initial interview will help clients come to an informed decision, the written information given at the start of a retainer, whether in a client care letter or some other format, will also be important in meeting this outcome.
3 Regulatory requirements and guidance
There is a limited amount of information that you must provide your client in writing at the start of a retainer under the SRA's Code. The SRA also suggest, in the IBs, that there is other information you should provide clients. This does not have to be in writing but it may be helpful, for both you and your client, to do so.
There is also additional information that you must supply clients with under the Provision of Services Regulations 2009. This information can be provided by a variety of means including via a client care letter.
3.1 What you must tell your client in writing
There are relatively few outcomes that require you to provide information in writing.
You must inform clients, in writing at the outset of their matter, of their right to make a complaint and details of how to do so. You must also inform them, in writing at the time of engagement and at the conclusion of your complaints procedure, of their right to complain to the Legal Ombudsman, the time frame for doing so and full details of how to contact the Legal Ombudsman.
This does not need to be done through a client care letter but many solicitors may choose to use this method.
The Law Society has provided some suggested wording:
[Practice name] is committed to high quality legal advice and client care. If you are unhappy about any aspect of the service you have received or about the bill, please contact [Name] on [phone number and e-mail] or by post to our [place] office. We have a procedure in place which details how we handle complaints which is available at [details of how to obtain it]. We have eight weeks to consider your complaint. If we have not resolved it within this time you may complain to the Legal Ombudsman.
If you are not satisfied with our handling of your complaint you can ask the Legal Ombudsman at [contact details] to consider the complaint. Normally, you will need to bring a complaint to the Legal Ombudsman within six months of receiving a final written response from us about your complaint or within six years of the act or omission about which you are complaining occurring (or if outside of this period, within three years of when you should reasonably have been aware of it).
Clients must also be made aware of their right to challenge, or complain about, the bill. This includes informing clients of their right to apply for assessment of the bill under Part III of the Solicitors Act 1974. Clients must also be made aware of the circumstances when they may be liable to pay interest on an unpaid bill.
Some clients may not have the right to complain to the Legal Ombudsman, for example:
- most businesses (unless they are defined as micro enterprises)
- charities or clubs with an annual income of more £1m, or
- trustees of trust with asset value of more than £1m
will not have the right to complain to the Legal Ombudsman. These clients will still need to be informed of their right to complain to you and their right to assessment. However, you may wish to highlight to them the limitations of the Legal Ombudsman scheme.
As this outcome requires you to inform your clients of this information at the start of an engagement, you may need to provide this information to repeat clients on numerous occasions. For this reason, you may wish to create a short letter or leaflet containing the essential information for repeat clients.
3.2 What you must tell your client
There are several outcomes that require you to advise clients of information. These requirements are summarised below. You do not have to provide this information in writing but if you chose not to you will need to consider how you will demonstrate that you have met the outcomes.
3.2.1 Regulatory status
You must also inform clients whether, and how, the services you provide are regulated and how this affects the protections available to the client. For most solicitors firms, all the services they provide will be regulated by the SRA. However, within multidisciplinary practice (or 'one-stop shops') the legal services provided may be regulated, while the non-legal services may not be regulated or may be regulated by another regulator. It is important clients are made aware which services are regulated and any differences there might be in the regulatory protections available.
3.2.2 Cost information and fee arrangements
Clients must be given the best possible information about the cost of their matter, both at the start of the retainer and throughout.
There are specific requirements on the information you must provide where there is a referral arrangement or fee sharing arrangement. You should explain any arrangements that are relevant to your client's instructions to allow clients to make an informed choice about how to pursue their matter. The information should be clear and in writing or in a form appropriate to the client's needs. Clients must be informed of any financial or other interest that an introducer has in referring the client to you. Clients must also be informed of any fee sharing arrangement that is relevant to their matter.
3.2.3 Other requirements
There are also specific requirements in relation to the
3.3 What you should tell your client
The SRA has provided numerous IBs to help solicitors comply with the outcomes in chapter 1 on client care of the SRA Code. Many of these relate to information for the client. Below is a brief summary of the IBs.
3.3.1 Service levels
You should agree service levels with your client, for example, the type and frequency of communications. The Law Society has provided an example of the types of service standards you may wish to agree to:
We will update you [by telephone or in writing] with progress on your matter [regularly, fortnightly, monthly, following agreed events].
We will communicate with you in plain language.
We will explain to you [by telephone or in writing] the legal work required as your matter progresses.
We will update you on the cost of your matter [monthly, three monthly, six monthly, at agreed events].
We will update you on whether the likely outcomes still justify the likely costs and risks associated with your matter whenever there is a material change in circumstances
We will update you on the likely timescales for each stage of this matter and any important changes in those estimates.
We will continue to review whether there are alternative methods by which your matter can be funded.
Both you and your client will have responsibilities and these should be explained to the client. The Law Society has provided an example of what you might agree:
Your responsibilities may include:
- We will review your matter regularly.
- We will advise you of any changes in the law.
- We will advise you of any circumstances and risks of which we are aware or consider to be reasonably foreseeable that could affect the outcome of your matter.
The client's responsibilities may include:
- You will provide us with clear, timely and accurate instructions.
- You will provide all documentation required to complete the transaction in a timely manner.
- You will safeguard any documents that are likely to be required for discovery.
3.3.2 Contact details
You should inform the client, in writing, of the name and status of the person dealing with their matter and the name and status of the person responsible for the overall supervision of the matter.
All information on fees should be clear and easily accessible and in a form that is appropriate to the client's needs and circumstances.
You should discuss with the client how they will pay and explain the consequences of being publicly funded in relation to costs. You should explain your fees and if and when they are likely to change. The Law Society has provided examples of what you may wish to include:
- the basis for the fixed fee or the relevant hourly rates and an estimate of the time to be charged
- whether rates may be increased during the period of the retainer
- expected disbursements and likely timeframes for these being due
- potential liability for others' costs, where relevant
- VAT liability
You should discuss with the client whether the potential outcome of the client's case is likely to justify the risk involved, particularly the risk of paying the costs incurred by someone else's fees. You should also bring to the client's attention the potential liabilities, including other payments, the client may face.
If you are acting under a conditional fee arrangement, or other fee arrangement governed by statute, you should provide the client with all the relevant information relating to that arrangement.
3.3.4 Client protection
Clients should be made aware and informed in writing if you propose to limit your liability to your client to a level above the minimum prescribed by the SRA.
Clients should also be informed if they are not entitled to the protections offered by the SRA compensation fund, for instance where non-legal services provided by the firm are unregulated by the SRA.
4 Law Society Good Practice
This section provides advice on the presentation of a client care letter and terms of business and the additional information you may wish to provide in these documents. This advice is based on what the Law Society considers to be good practice.
The SRA Code no longer requires you to provide large amounts of information to clients in writing. However, it you must inform clients of certain matters and continue to update clients. Good communication is needed to meet these outcomes. The advice below provides examples of what the Law Society considers is good practice when communicating in writing.
4.1.1 Principles of effective communication
To communicate well, you should:
- Make sure the information you need to communicate is presented in a clear and straightforward manner, so that clients are in a position to make informed decisions. Complicated forms and overly legalistic language will act as a barrier to understanding.
- Be alert to communication challenges that clients face, such as hearing difficulties, disability, learning difficulties, language barriers or other cross-cultural issues, and look at ways to overcome those challenges.
- Consider your client demographic when deciding how to present information. For example, you may provide information in a language other than English, if you have a large client base from a particular ethnic group for whom English is a second language.
As people understand information differently, you may explain to your client the importance of the client care information you provide and the terms of business and highlight any key information. You should also provide the opportunity to explain any parts of the documents that they do not understand or have questions about.
4.1.2 Length and style
Many clients comment about being given large documents containing lots of legal language in small print by their solicitors. Often these documents are not read or understood.
You may wish to consider adopting the following style for your written client information to help clients understand the contents:
- ensure the key information is highlighted early on. If the document will exceed three pages once all of the required information is included you may wish to move detailed information into annexes. This will help ensure important information is not overlooked
- use a clear font, in no smaller than 11 point
- make use of headings and bullet points to break up blocks of text and highlight points
- use plain language
- only include terms and conditions which actually apply to the specific retainer
- where a document is long, include a table of contents
These guidelines are generic and it will be important to consider the needs of your clients when drafting information. For example, a larger font may be appropriate if a client has poor eyesight.
4.2 Terms of business
There is no regulatory requirement to set out terms of business. However, the Law Society believes that it is good business practice to do so.
Terms of business will normally set out details of:
- standards of service clients can expect
- information on professional indemnity insurance (also see requirements under Provision of Services Regulations 2009)
- data protection issues
- storage of documents and any related costs
- outsourcing of work
- auditing and vetting of files
- any clauses limiting liability
- processes for terminating the retainer
- client due diligence you will undertake
- payments of interest on money held in client accounts
While not a regulatory requirement, you may wish to get your client to sign and date a copy the terms of business. Under rule 48.8 of the Civil Procedure Rules, if the client has not agreed your terms of business in a contentious matter in the County Court, you will be unable to claim any more costs from the client than the client is entitled to recover from the other side.
4.2.1 Information on professional indemnity insurance(PII)
Under the EU Service Directive, you must provide clients with the contact details of your PII provider and the territorial coverage of that insurance. This information can be provided in the client care letter, via the firm's website or made easily accessible at the firm's place of business. For more information see our practice note on the directive.
4.2.2 Data protection issues
You must comply with the Data Protection Act 1998 with respect to information held on your client. You should include reference to how you comply with the Data Protection Act in your terms of business.
We use the information you provide primarily for the provision of legal services to you and for related purposes including:
- updating and enhancing client records
- analysis to help us manage our practice
- statutory returns
- legal and regulatory compliance
Our use of that information is subject to your instructions, the Data Protection Act 1998 and our duty of confidentiality. Please note that our work for you may require us to give information to third parties such as expert witnesses and other professional advisers. You have a right of access under data protection legislation to the personal data that we hold about you.
We may from time to time send you information that we think might be of interest to you. If you do not wish to receive that information please notify our office in writing.
Read our practice note on data protection.
4.2.3 Details on storage of documents and any related costs
You should advise the client how long you will retain the file and outline what will happen to the file after that time.
You should advise the client of costs related to all of the following:
- additional copies
If you intend to only store documents in an electronic format, you should consider whether the absence of paper documents will be detrimental to the client's interests before you agree to such storage methods with your client.
You should also consider any file retention requirements of your indemnity insurers when assessing the appropriate length of time to retain client files.
For further information on storage of files, particularly in relation to wills and probate files, see the Law Society's file retention practice note.
For further information on retention of client due diligence files, see paragraph 3.8 of the Law Society's anti-money laundering practice note.
After completing the work, we will be entitled to keep all your papers and documents while there is still money owed to us for fees and expenses.
We will keep our file of your papers for up to [x] years, except those papers that you ask to be returned to you. We keep files on the understanding that we can destroy them [x] years after the date of the final bill. We will not destroy documents you ask us to deposit in safe custody.
If we take papers or documents out of storage in relation to continuing or new instructions to act for you, we will not normally charge for such retrieval.
However we may charge you both for:
- time spent producing stored papers that are requested
- reading, correspondence or other work necessary to comply with your instructions in relation to the retrieved papers
4.2.4 Outsourcing of work
Where you outsource work on client files, there is a risk your outsourced provider may breach client confidentiality.
Drawing attention to this risk may mitigate any breach of confidentiality that occurs, but you still risk regulatory action. You should ensure that you have a confidentiality agreement with your suppliers.
In your terms and conditions you should:
- advise the client if the practice outsources work and the type of work it outsources
- alert the client to the potential risks in relation to preserving client confidentiality
- ask the client to tell you if they object to this practice
Sometimes we ask other companies or people to do [typing/photocopying/other work] on our files to ensure this is done promptly. We will always seek a confidentiality agreement with these outsourced providers. If you do not want your file to be outsourced, please tell us as soon as possible.
There are additional requirements relating to the outsourcing of work within the new handbook.
4.2.5 Auditing and vetting of files
You should advise your client if your files are required to be produced to assessors or others as part of an audit or quality check.
External firms or organisations may conduct audit or quality checks on our practice. These external firms or organisations are required to maintain confidentiality in relation to your files.
4.2.6 Any clauses limiting liability
Outcome 1.8 of chapter 1 of the SRA Code allows you to limit your practice's liability under certain circumstances. The related IB suggests you ensure that you advise the client of any limitation of liability in writing and specifically draw their attention to it.
Where your practice is a limited liability partnership (LLP) you should also explain any limitation on personal liability for the members, directors and employees of the practice.
Our liability to you for a breach of your instructions shall be limited to £X, unless we expressly state a higher amount in the letter accompanying these terms of business. We will not be liable for any consequential, special, indirect or exemplary damages, costs or losses, or any damages, costs or losses attributable to lost profits or opportunities.
We can only limit our liability to the extent the law allows. In particular, we cannot limit our liability for death or personal injury caused by our negligence.
Please ask if you would like us to explain any of the terms above.
4.2.7 Processes for terminating the retainer
You should clearly state how a client can terminate your retainer and the consequences of them doing so. You should also outline the circumstances under which you can terminate the retainer. You should only cease to act for a client with good reason and with providing reasonable notice. This may be an appropriate place to mention your right to a lien for unpaid costs.
You may end your instructions to us in writing at any time, but we can keep all your papers and documents while there is still money owed to us for fees and expenses.
We may decide to stop acting for you only with good reason. We must give you reasonable notice that we will stop acting for you.
If you or we decide that we should stop acting for you, you will pay our charges up until that point. These are calculated on [an hourly basis plus expenses/by proportion of the agreed fee] as set out in these terms and conditions.
It should be noted that if the retainer is terminated without good reason then a solicitor may not be able to require the client to pay for work done up to this point. (Minkin v Cawdery Kaye Fireman & Taylor (A firm)  EWHC 177 (QB) and Underwood Son & Piper v Lewis  2 QB 306).
4.2.8 Money laundering and terrorist financing
Your anti-money laundering obligations depend on whether you are providing services to this client within the regulated sector.
If you are providing a client with regulated services, you must conduct client due diligence and monitor your client's retainer for warning signs of money laundering or terrorist financing.
If you are not providing a client with regulated services, you must still monitor your client's retainer for warning signs of money laundering or terrorist financing.
If you provide both regulated and non-regulated services, you may wish to apply the higher level of obligations to all clients. However, you should consider the cost implications.
For advice on whether you are providing services within the regulated sector and other anti-money laundering requirements, see the Law Society's anti-money laundering practice note.
For further advice on your counter terrorist financing obligations, see the Law Society's anti-terrorism practice note.
188.8.131.52 Client due diligence (CDD)
For more information on how to conduct CDD, see chapter 4 of the Law Society's anti-money laundering practice note.
While you may have already obtained CDD material before sending out the client care letter, you should still include information in the terms and conditions about your CDD obligations.
You should cover all of the following points in your terms and conditions:
The Money Laundering Regulations 2007 require you to:
- obtain information about a client's identity and to verify that information
- obtain identity information about people related to the client (beneficial owners), where relevant, and at times verify that information
- continue to monitor the transaction and keep identity information up to date
You may verify a client's identity in a number of ways. You should state your practice's preferred method of verification, eg passport.
If the client has difficulty providing the information you requested, you should ask them to contact you to discuss other ways to verify their identity.
The law requires solicitors to get satisfactory evidence of the identity of their clients and sometimes people related to them. This is because solicitors who deal with money and property on behalf of their client can be used by criminals wanting to launder money.
To comply with the law, we need to get evidence of your identity as soon as possible. Our practice is to [insert your standard practice]. If you cannot provide us with the specific identification requested, please contact us as soon as possible to discuss other ways to verify your identity.
184.108.40.206 Making a disclosure
If you suspect a client is engaged in money laundering or terrorist financing, you may risk committing a principal money laundering or terrorism offence, or an offence of failing to disclose your suspicions to relevant authorities.
For further information on your legal options in these circumstances, see chapter 5 of the Law Society's anti-money laundering practice note.
Making a disclosure may require you to either temporarily cease work on the client's retainer or to withdraw completely. It is not tipping-off to include a paragraph about your obligations under the money laundering legislation in your terms of business.
We are professionally and legally obliged to keep your affairs confidential. However, solicitors may be required by statute to make a disclosure to the Serious Organised Crime Agency [now known as the National Crime Agency (NCA)] where they know or suspect that a transaction may involve money laundering or terrorist financing. If we make a disclosure in relation to your matter, we may not be able to tell you that a disclosure has been made. We may have to stop working on your matter for a period of time and may not be able to tell you why.
4.2.9 Mortgage fraud
Where you are acting for both the lender and the purchaser you should highlight the lender's requirements that you fully disclose to them relevant facts affecting their decision to make the loan. If you specifically draw this term to your client's attention and have them sign their acceptance of this term, then you may rely on this as consent from the client to make the disclosures to the lender.
We are also acting for your proposed lender [Name of bank/building society] in this transaction. We have a duty to fully reveal to your lender all relevant facts about the purchase and mortgage. This includes:
- any differences between your mortgage application and information we receive during the transaction
- any cash back payments or discount schemes that a seller is giving you
On 13 June 2014, the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 will come into force and you will need to provide the information in the model instructions on the right to cancel (Word 13kb).
Read the Consumer Contracts Regulations 2013 practice note.
020 7320 5675
020 7320 5675
4.2.10 Payment of commissions
You must not make secret profit from your relationship with your client. Outcome 1.15 of chapter 1 of the SRA Code requires that you account to your client for any financial benefit you receive as a result of your instructions. This includes commission. Where you receive a financial benefit as a result of acting for a client, you should normally either:
- pay it to the client
- offset it against your fees, or
You should only keep it where you can justify keeping it, you have told the client the amount of the benefit (or an approximation if you do not know the exact amount) and the client has given informed consent that you can keep it.
If the commission relates to activities regulated by the Financial Services Authority (FSA) you will need to consider FSA requirements as well.
4.2.11 Payments of interest on money held in client accounts
The Accounts Rules provide that you must account to the client for any interest earned on client monies, when it is fair and reasonable to do so in all the circumstances. You must have a written policy on the payment of interest, which seeks to provide a fair outcome. The terms of the policy must be drawn to the attention of the client at the outset of a retainer, unless it is inappropriate to do so in the circumstances. For example, it may be unnecessary if you have acted for the client previously. You may wish to include a paragraph in your terms of business about your interest policy.
4.2.12 Consumer contract regulations
On 13 June 2014, the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 came into force.
These regulations require solicitors to provide certain information depending on where the contract is made. If a contract is made 'off premises' or 'distance selling', you will need to provide the information in the model instructions on the right to cancel.
Read more information and advice in our Consumer Contracts Regulations 2013 practice note (includes model instructions on the right to cancel)
4.2.13 Financial arrangements with clients
You should tell clients how you will receive funds from them and make payments to them. This is due to the strict requirements for client accounts, and the risk that clients may try to use your client account to launder money. Large cash payments may also be a sign of money laundering and accepting them can also be a security risk. You should establish a policy of not accepting cash payments above a certain limit either at your office or into your bank account.
Our practice's policy is [not to accept cash from clients/to only accept cash up to £X].
If you try to avoid this policy by depositing cash directly with our bank, we may decide to charge you for any additional checks we decide are necessary to prove the source of the funds.
Where we have to pay money to you, it will be paid by cheque or bank transfer. It will not be paid in cash or to a third party.
For more information see our practice note on anti-money laundering.
4.2.14 Financial services
If your practice is authorised by the FSA, you must comply with the requirements of the FSA as to status disclosure statements in your terms of business. If you are not authorised by the FSA, as a solicitor you are still entitled to carry out exempt regulated activities under the regulation of the SRA, as part of the Designated Professional Body regime. You must include a disclosure in your terms and conditions that clearly states your regulatory status. The Financial Services (Conduct of Business) Rules 2001 set out the information you are required to disclose.
If you provide an insurance mediation activity with or for a client, it must include an additional statement which is set out in the rules.
From 1 April 2013, the FSA's functions will be taken over by two new organisations: the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). The SRA is updating their rules to reflect this. Within the new rules the term 'FSA' will be replaced by 'FCA'.
4.3 Other information you may wish to give your client
The Law Society believes that there is other information, outside of that described in the SRA Handbook that you may wish to provide to the client.
Failure to provide adequate costs information is one of the areas most likely to cause complaints. You should explain your fees clearly and in a manner the client can understand both at the outset and as the matter progresses.
It is not always possible to agree a fixed fee or give a realistic estimate. In these cases you may
- give a forecast within possible ranges, explaining the factors will affect the final cost, or
- explain why the costs cannot be realistically estimated and provide the best information possible about the cost of the next stage of the matter
Clients have a right to complain about the bill. You must warn clients that you have a right to exercise a lien over their papers for unpaid costs at the start of the retainer.
4.3.2 Contact details
As well as providing details of the person handling the matter, you may also find it useful to provide details of other members of staff who will be able to help with any queries.
It can also be useful to provide information about when, and how, the person handling the matter can best be contacted.
You may wish to advise the client about opening hours and any out-of-hours service you provide.
4.3.3 Next steps
It is important to agree next steps with clients, so they are clear what to expect. Where possible, you should include information about timescales for completing these next steps to manage the client's expectations and provide yourself with a timetable to help limit delay.
5 More information
5.1 Law Society
LawyerlineLaw Society Consulting
Practice Advice Service
Training - regular programmes on client care and complaints management
Lexcel - our practice management standard, awarded only to practices meeting the highest management and client care standards
Law Management Section- join for support and training
Law Society publications - order from our bookshop
Practice Management Handbook
Companion to the Solicitors' Code of Conduct 2007
The Solicitor's Handbook
Lexcel Office Procedures Manual
Excellent Client Service
If you require further support, Law Society Consulting can help. We offer expert and confidential support and guidance, including face-to-face consultancy on risk and compliance. Please contact us on 020 7316 5655, or email email@example.com.
Find out more about our consultancy services
Solicitors Regulation Authority's Professional Ethics Helpline for advice on conduct issues.