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.
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.
The Solicitors Disciplinary Tribunal has imposed significant fines for this type of conduct.
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 SRA 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.
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 could be in breach of Outcome 1.1 of the SRA Code, to treat your client fairly.
Outcome 8.1 of the SRA Code states that you must ensure that any publicity provided by your firm must not be misleading or inaccurate. Outcome 8. 2 states that publicity relating to your firm's charges must be clearly expressed, and must state whether disbursements and VAT are included in the quoted sum.
To comply with these outcomes you should avoid the following practices:
- estimating charges pitched at an unrealistically low level (IB 8.7)
- advertising additional 'sundries' or 'catch all' amounts for such without providing details about the purpose of the charges
- providing estimated or fixed charges plus disbursements, if expenses which are in the nature of overheads are then charged as disbursements
- providing 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.
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.
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 and disbursements are included in the quoted sum (Outcome 8.2). Quotes should be as comprehensive as possible. Where VAT is not mentioned, it should be presumed that the sum is VAT inclusive.
2.4 Advising your client on the basis of cost information
Where you have made it clear that your headline price does not represent a fixed charge and excludes certain charges, Outcome 1.13 of the SRA Code requires that you give your client the best possible cost information at the outset, and information about the likely overall cost as the matter progresses. In particular you should take account of IBs 1.13-1.21, which indicate that you should:
- discuss whether the potential outcomes of the client's matter are likely to justify the expense or risk involved, including any risk of having to pay someone else's legal fees
- clearly explain your fees and if and when they are likely to change
- warn about any other payments for which the client may be responsible
- discuss how the client will pay, including whether public funding may be available, whether the client has insurance that might cover the fees, and whether the fees may be paid by someone else such as a trade union
- where you are acting for a client under a fee arrangement governed by statute, such as a conditional fee agreement, give the client all relevant information relating to that arrangement
- where you are acting for a publicly funded client, explain how their publicly funded status affects the costs
- provide the information in a clear and accessible form which is appropriate to the needs and circumstances of the client
- where you receive a financial benefit as a result of acting for a client, either pay it to the client, offset it against your fees, or keep it only where you can justify keeping it and the client has agreed to the amount
- ensure that disbursements included in your bill reflect the actual amount spent or to be spent on behalf of the client
- inform your client of incremental costs throughout your work and any changes to cost estimates
Failure to observe these standards may be regarded as providing inadequate professional services by the Legal Ombudsman.
2.4.1 Referral fees, fee sharing and financial benefits
Where your client has been referred as part of an arrangement with a third party who introduces business to you and/or with whom you share your fees (where permitted by the SRA Code), you must ensure that your client is informed of any financial or other interest which an introducer has in referring the client to you and of any fee sharing arrangement relevant to their matter (Outcomes 9.4 and 9.5). This should include drawing clients' attention to any payment or other consideration, usually in writing and details of the amount of any payment to an introducer (IBs 9.5 and 9.6).
Likewise if your client has been introduced to a third party you must fully inform the client of any financial benefit (any commission, discount or rebate) or other interest that you have in making that referral.
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.
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 should 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 (IB 8.9). 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.
Misleading cost information and overcharging has led to the Solicitors' Disciplinary Tribunal ordering the payment of significant fines. In the context of headline prices for conveyancing transactions, partners were fined for conduct including: providing costs information across a number of different documents, providing inconsistent costs information and including a number of items of additional costs in separate documents despite them being usual items of work to be expected for the type of transaction.
'Disbursements' are defined by the Solicitors' Accounts Rules 2011 (SAR) as any sum that you spend or are going to spend on behalf of your client or trust, including any VAT element.
You should not charge for items as disbursements when they do not amount to such. You should 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. You should be clear about what amounts to the headline figure, any other fees and disbursements and explain what any other fees relate to so that clients can understand if another solicitor has included them in their headline figure.
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 SRA 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
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 and so can be charged as fees, or form part of your firm's overheads.
Additional fees may include:
- 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
- minor expenses such as postage and telephone costs
The SRA advises that your firm's overheads should not be described as disbursements in your advertisements (IB 8.8). These elements should not be included as additional charges that are passed on to your clients. Examples include:
- annual subscription costs and transaction fees for using online solutions to manage business processes. This would not preclude such costs being passed on to clients, for example through an administration charge (as opposed to as a disbursement)
- petty charges such as postage, photocopying and faxes, and
- professional indemnity insurance
- the costs of undertaking client due diligence, including identification checks for anti-money laundering purposes. However, if the costs is particularly high (eg overseas company search), this cost may be charged to the client with client consent and explanation to the client of the likely cost
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
- 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.
4 More information
4.1 Legal and other requirements
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. The Practice Advice Service can be contacted on 020 7320 5675 from 09:00 to 17:00 on weekdays.
4.2.2 Law Society Consulting
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