The case for fixed fees in conveyancing

Why clients ask for one number

Buying or selling a property is usually the largest transaction a client makes, and the legal fee is one of dozens of costs they are tracking. They want a number they can put in a budget. An hourly estimate with a range feels like an open cheque.

At Fairlie & Co. we moved residential conveyancing (real estate closings in the US) to fixed fees four years ago. More enquiries turned into instructions, and more clients came back for their next purchase. Clients also call more freely, because a question no longer turns up as a line on their invoice.

Fixed fees also change the conversation inside the firm. Lawyers stop thinking about how long a task took and start thinking about how to do it well in the time the fee allows. That is a healthier question for everyone, including the client.

What the fee covers

A fixed fee works when the scope is clear. Ours covers a standard residential purchase or sale from contract review to settlement, and it lists exactly what falls outside it.

• Included: contract review, search review, liaising with the lender, settlement and post-settlement notices

• Excluded: disbursements such as search and registration fees, passed on at cost

• Excluded: off-the-plan purchases, subdivisions and disputes, quoted separately

• Variation triggers: a second contract, a failed settlement or a change of buyer

We publish the fee for each property type on our website, and the costs agreement repeats the same list. Clients rarely argue about a variation when the trigger was written down before they signed.

We also say what the client can expect from us in return: a call at contract stage, an update at each milestone and an answer to any question within a business day. Clients judge a fixed fee by the service around it, not only by the number.

Setting the price

We set our first fees from three years of time records on residential matters. We took the median hours for each property type, multiplied them by a blended rate across the team and added a margin for the matters that run long.

1. Group past matters by type: standard purchase, standard sale, and purchase and sale together.

2. Find the median hours for each group, not the average. A few difficult matters pull the average up.

3. Price at the median, plus a margin that covers the longer matters.

4. Check the price against what local firms charge, and adjust if you are far outside it.

We review the prices every year, alongside the quarterly time review. A fee that has not changed in three years is usually too low.

The first set of prices will not be perfect. Some will be too low and a few too high. That is fine as long as you are recording time and reviewing it, because the review tells you which ones to change.

Protecting the margin

Fixed fees only work if you know what a matter costs to run. We still record time on every conveyancing file in six-minute units, even though the client never sees it. Every quarter we compare the time on each matter against its fee.

That review shows when a fee is too low and which matter types run long. Our average purchase took 6.2 hours two years ago and takes 4.8 now, mostly because the matter template sets every key date and task when the file opens. When a matter type runs long two quarters in a row, we either fix the process or raise the fee.

Fixed fees without time records are a guess. With time records, they are a pricing decision you can revisit every quarter.

Ravi Kapoor, Billing specialist, Filebird

The review also shows where the time goes inside a matter. For us, the biggest single gain came from the settlement stage, where a checklist in the template cut the back and forth with lenders and the other side.

Where fixed fees do not fit

Fixed fees work for work you understand. They work less well for matters where the scope cannot be known at the start. We still quote off-the-plan purchases, subdivisions and disputes individually, and some of those are better billed by time with a clear estimate.

A good test: if two experienced lawyers would estimate the same matter within an hour of each other, it can probably be fixed. If their estimates are days apart, it probably should not be.

Telling clients about variations

The fee only stays fixed if the scope does. When something outside the scope comes up, tell the client in writing, with a price, before you do the work. Clients accept variations they agreed to and dispute the ones they find on the final invoice.

Costs disclosure rules apply to fixed fees as much as to hourly ones. Check your law society or state bar’s requirements when you write the agreement.

Keep variations rare. If most matters of a type end up with a variation, the scope is wrong or the fee is too low, and the fixed fee is no longer doing its job.

Making the change

If you bill conveyancing by the hour today, start with one matter type, the one you do most often and know best. Run it on fixed fees for two quarters, review the time records and adjust the price before you extend it to anything else.

Tell existing clients why you are changing. Most will see a fixed fee as a benefit, and the ones who come back for their next purchase will already know what to expect.