Funding options for legal services - Fixed fees

Learning Outcomes

This article outlines fixed fee arrangements for legal services, including:

• The definition and key features of fixed fee arrangements
• Suitability criteria and common use cases for fixed fees
• Regulatory and professional conduct requirements (SRA Code of Conduct, Transparency Rules, and Accounts Rules)
• Scope definition, exclusions, assumptions, and variation mechanisms
• Handling of client money, advance payments, disbursements, and VAT in fixed fee retainers
• Distinction between solicitor and client costs and costs between the parties in litigation
• Advantages and disadvantages of fixed fees for clients and solicitors
• Ethical duties, conflicts of interest, and informed consent in fixed fee contexts
• Management of scope changes and communication of additional charges
• Responsibilities when instructing counsel and any impact on fixed fees
• Website pricing, transparency obligations, and publication requirements for specified services
• Risks of unfair or unreasonable contentious business agreements

SQE1 Syllabus

For SQE1, you are required to understand the main private funding options for legal services, including fixed fees, with a focus on the following syllabus points:

• the definition and features of fixed fee arrangements
• how to calculate and communicate fixed fees to clients
• the regulatory and professional conduct requirements for fixed fees (including SRA Code of Conduct and Transparency Rules)
• the advantages and disadvantages of fixed fees for clients and solicitors
• ethical and practical issues that may arise when using fixed fees
• the distinction between solicitor and client costs and costs between the parties in litigation
• handling client money, advance payments on account, and disbursements under the SRA Accounts Rules
• responsibilities when instructing counsel and explaining any impact on fixed fees
• referral and fee-sharing disclosures and the prohibition on referral fees in personal injury claims

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What is a fixed fee arrangement in legal services, and how does it differ from an hourly rate?
2. Which SRA rules require solicitors to provide clients with clear information about fixed fees?
3. Name two advantages and two disadvantages of fixed fees for clients.
4. What should a solicitor do if a fixed fee matter becomes significantly more complex than originally anticipated?

Introduction

When a client instructs a solicitor, one of the first questions is how much the legal service will cost. Fixed fees are a common funding option that provide clients with certainty about the total cost for a defined legal service. For SQE1, you must know what fixed fees are, when they are suitable, and the regulatory and ethical requirements for using them. Fixed fees are often used in routine, predictable work where the scope is clear at the outset, but they can be adapted and staged for more complex work if assumptions and variation mechanisms are carefully agreed.

Key Term: fixed fee
A fixed fee is an agreed, set amount charged for a specific legal service, regardless of the time actually spent by the solicitor.

Key Term: disbursement
A disbursement is a payment a solicitor makes to a third party on the client’s behalf (for example, search fees or court fees). Whether VAT applies depends on HMRC rules for true disbursements; this must be clarified to the client.

Fixed Fee Arrangements: Key Features

A fixed fee is a contractual agreement between the solicitor and client to complete a specific task or service for a set price. The fee is agreed at the outset and does not change, even if the solicitor spends more or less time than expected. Fixed fees are most suitable for legal work where the scope is clear and the likely time and resources can be accurately estimated.

Key features of fixed fees include:

• a defined scope of work, often framed as a list of included tasks and assumptions
• clarity on what is excluded and will be charged separately (for example, additional hearings, counsel’s fees, or unusual disbursements)
• whether VAT is included or excluded from the quoted price
• how disbursements will be handled, including likely amounts and VAT treatment
• payment terms (for example, staged payments, deposits, or money on account)
• a mechanism for scope changes (for example, variation clauses, caps, or switch to hourly rates if assumptions fail)

Key Term: scope of work
The scope of work is the precise description of the tasks and services included in the fixed fee arrangement.

Fixed fees may be structured:

• as “all-in” packages (including standard disbursements and VAT)
• exclusive of disbursements (with separate billing as incurred)
• staged or modular (for example, a fixed fee for each phase, such as initial advice, drafting, filing, and representation)
• with caps or ceilings (for example, an hourly rate capped at a maximum, which is not strictly a fixed fee but offers similar certainty)

Careful scoping reduces disputes and protects both client and solicitor. In litigation, it is common to offer fixed fees for distinct steps (such as drafting a claim or attending a single hearing) while keeping ongoing case management on hourly rates due to unpredictability.

Regulatory and Professional Conduct Requirements

Solicitors must comply with both statutory and regulatory rules when offering fixed fees. The main requirements are:

• Provide clear, written information about the fixed fee and what it covers.
• Explain any circumstances where additional charges may arise.
• Ensure the client understands the scope and limitations of the fixed fee.
• Comply with SRA Code of Conduct and SRA Transparency Rules.
• Handle client money, advance payments, and disbursements in line with the SRA Accounts Rules.
• In litigation, explain the distinction between solicitor and client costs and costs between the parties, including likely recoverability from the opponent.
• Disclose any referral or fee-sharing arrangements and avoid prohibited referral fees.

Key Term: SRA Transparency Rules
The SRA Transparency Rules require firms to publish clear pricing and service information for certain legal services, including fixed fees, to help clients make informed choices.

Key Term: solicitor and client costs
Solicitor and client costs are the fees the client agrees to pay to their own solicitor under the retainer, regardless of what the opponent may later be ordered to pay in litigation.

Key Term: costs between the parties
Costs between the parties are the legal costs a court may order one party to pay the other at the end of litigation; they are distinct from solicitor and client costs and may be lower than the client’s own costs.

In contentious matters, a fixed fee retainer may constitute a contentious business agreement under the Solicitors Act 1974. While such agreements can provide certainty, the court may set them aside if they are unfair or unreasonable. This reinforces the need for transparent terms, appropriate scoping, and fairness in pricing.

Key Term: contentious business agreement
A contentious business agreement is an agreement about a solicitor’s remuneration in litigation. It may be set aside by the court if unfair or unreasonable.

SRA Code of Conduct

Solicitors must give clients the best possible information about how their matter will be priced, both at the time of engagement and as the matter progresses (SRA Code of Conduct, para 8.7). This includes:

• stating the total fixed fee (or, if not possible, an average or range of fees)
• explaining what is included and what is not included
• warning clients about any likely additional costs

The Code also requires solicitors to act with integrity, maintain trust and confidence in the profession, and act in the client’s best interests. In fixed fee arrangements, this means not over-promising, not concealing potential extras, and updating costs information promptly if assumptions fail or scope changes.

SRA Transparency Rules

For certain services (e.g., conveyancing, probate, employment tribunals), firms must publish fixed fee information on their website, including:

• the total cost or average cost
• a description of the service covered
• details of any likely disbursements
• the experience and qualifications of those doing the work

The Transparency Rules also require firms to provide information about key stages and typical timescales, whether VAT is included, and how to complain (including signposting to the Legal Ombudsman). Other services covered include immigration (excluding asylum), motoring offences (summary only), debt recovery (up to £100,000), and licensing applications for business premises. Publishing this information is intended to support informed client choice and deter hidden extras.

Key Term: statute bill
A statute bill is the formal bill a solicitor must deliver for non-contentious business before suing for fees. It has specific legal significance and must be clear and itemised enough to be assessed if challenged.

Calculating and Communicating Fixed Fees

Setting a fixed fee requires careful estimation of the time, complexity, and resources needed for the matter. Solicitors should:

• define the scope of work in detail
• consider the likely time and costs involved
• check for any foreseeable risks or complications
• compare with market rates for similar services

Further considerations:

• identify assumptions (for example, “no title defects,” “no contested hearing,” or “no complex tax advice needed”)
• specify exclusions (for example, counsel’s fees, expert reports, additional searches, or adverse costs risks)
• clarify whether VAT is included, and whether disbursements attract VAT
• plan a variation mechanism (for example, a pre-agreed hourly rate for out-of-scope work or a fixed price menu for additional tasks)
• ensure website pricing and client care letters are consistent

The fixed fee should be agreed in writing, usually in the client care letter or retainer agreement. The agreement must specify:

• what is included in the fixed fee
• what is excluded or may incur extra charges
• when and how the fee is to be paid

It is good practice to explain how money on account will be handled. Advance payments of fees and expenses may, in certain circumstances, be held in a business account if the client is properly informed; however, money held on account of costs not yet incurred is ordinarily client money and must be held in a client account under the SRA Accounts Rules. When instructing counsel in a fixed fee matter, remember that the solicitor is personally responsible for counsel’s fee—seek money on account and obtain informed consent if counsel’s fees are not included within the fixed fee.

Key Term: client money
Client money includes funds held or received by a firm on behalf of a client, such as money on account for future fees or disbursements. It must be handled in accordance with the SRA Accounts Rules.

In litigation, give clear information about solicitor and client costs versus costs between the parties. The client might recover some costs from their opponent, but this often does not match the client’s own costs. On tracks with fixed recoverable costs, recovery is constrained to fixed amounts. A fixed fee retainer does not guarantee full recovery from the opponent.

Worked Example 1.1

A client instructs a solicitor to draft a simple will. The solicitor offers a fixed fee of £350 plus VAT, covering the initial meeting, drafting, and one round of amendments. The client later asks for a complex trust clause to be added, requiring significant extra work.

Answer:
The solicitor should explain that the additional work falls outside the original fixed fee scope and agree a further fee with the client before proceeding.

Worked Example 1.2

A firm quotes a fixed fee for an unfair dismissal claim up to and including issuing proceedings but excludes representation at any hearings and counsel’s fees. The client later requests representation at a preliminary hearing.

Answer:
Representation at the hearing is outside scope. The solicitor should give a clear quotation (for example, a fixed fee for the hearing or an hourly rate) and explain whether counsel will be instructed, obtaining money on account if needed.

Worked Example 1.3

A solicitor agrees a fixed fee for residential conveyancing. The firm’s website shows a lower “from” price that assumes no mortgage and no leasehold issues. The client has a leasehold property with a complex management pack and lender requirements.

Answer:
The solicitor should explain that the website price is based on stated assumptions and provide a revised fixed fee reflecting leasehold and lender work. Transparency requires clear publication of assumptions and likely extras.

Worked Example 1.4

A personal injury firm receives potential clients via a third-party introducer. The firm offers a fixed fee for initial advice on liability. The introducer requests a referral payment for each client.

Answer:
Referral fees are prohibited in personal injury claims. The solicitor must not make or receive such payments and should keep records to demonstrate compliance. Any permitted fee-sharing arrangements must be in writing and disclosed to the client.

Advantages and Disadvantages of Fixed Fees

Advantages

• Cost certainty for clients—no surprises about the final bill.
• Easier for clients to budget for legal services.
• Reduces disputes over time spent or hourly rates.
• Encourages efficiency in routine matters.
• Promotes transparency and comparability between firms when published under the Transparency Rules.
• Can improve client satisfaction where scope is clear and communication is good.

Disadvantages

• Risk for solicitors if the matter becomes more complex or time-consuming than expected.
• May discourage solicitors from spending extra time if not strictly necessary.
• Can be inflexible if the client's needs change or the scope expands.
• Requires careful definition of what is and is not included.
• In litigation, fixed fees may exceed recoverable costs from the opponent, leaving the client to fund any shortfall.
• If assumptions are unrealistic or not explained, the agreement may be challenged (and in contentious matters, potentially set aside as unfair or unreasonable).

Worked Example 1.5

A firm offers a fixed fee of £1,000 for residential conveyancing. The fee covers standard searches, contract review, and completion. During the transaction, a title defect is discovered, requiring additional legal work.

Answer:
The solicitor should inform the client that resolving the title defect is outside the fixed fee and provide a clear estimate for the extra work before proceeding.

Worked Example 1.6

A client agrees a fixed fee for a debt recovery claim up to judgment. The matter settles early after a single letter. The client queries whether they should pay the full fixed fee.

Answer:
Fixed fees reflect the agreed scope, not time spent. If the retainer provides for no refund on early settlement, the full fee may be payable. However, firms often offer staged or outcome-sensitive fixed fees. Terms should be clear and fair to avoid complaints.

Ethical and Practical Considerations

Solicitors must always act in the best interests of each client (SRA Principle 7). When using fixed fees:

• Do not compromise on quality to save time or costs.
• Be transparent about what is included and excluded.
• Warn clients promptly if extra work is needed and agree further fees in advance.
• Avoid conflicts between the solicitor's financial interests and the client's need for competent service.
• Do not take unfair advantage of clients or third parties, especially where they have limited legal knowledge or are vulnerable.
• Ensure referral and fee-sharing arrangements are disclosed, and comply with prohibitions (for example, no referral fees in personal injury claims).
• Manage client money correctly and provide receipts and bills that meet statutory and regulatory requirements.

Key Term: informed consent
Informed consent means the client understands and agrees to the terms, scope, and cost of the fixed fee arrangement, including any limitations or exclusions.

When instructing counsel, the solicitor remains responsible for counsel’s fees. If counsel is needed and not included in the fixed fee, obtain money on account and the client’s informed consent to any additional costs. Ensure quality control by reviewing counsel’s advice and exercising independent judgment; if advice appears obviously wrong, seek clarification or a second opinion.

If a client disputes a non-contentious fixed fee bill, the Legal Ombudsman has powers to limit a lawyer’s fees to a specified amount, and courts can assess bills. Fair, reasonable pricing and clear communication reduce the risk of complaints and regulatory action.

Exam Warning

If a solicitor fails to warn the client about extra costs when the matter becomes more complex, this may breach SRA conduct rules and lead to complaints or disciplinary action.

Worked Example 1.7

A firm quotes a fixed fee for making a probate application. The quote excludes inheritance tax calculations and complex estate administration. The client later asks for tax planning advice.

Answer:
Tax planning is outside scope. The solicitor should explain the exclusion, offer a separate fixed fee or hourly rate for tax advice, and ensure the client care letter is updated to reflect any agreed variation.

When Are Fixed Fees Appropriate?

Fixed fees are most suitable for legal services that are routine, predictable, and have a clearly defined scope. Common examples include:

• drafting straightforward wills
• residential conveyancing (standard transactions)
• uncontested probate applications
• simple contract reviews
• standard employment law advice

For complex, unpredictable, or open-ended matters, fixed fees may not be appropriate. In such cases, consider hybrid approaches:

• a fixed fee for initial advice and scoping, followed by hourly rates
• staged fixed fees for each procedural step, with clear assumptions
• capped fees (not strictly fixed) offering cost certainty up to an agreed limit

In litigation, remember to explain likely costs recovery and the impact of fixed recoverable costs regimes; a client should not assume that a fixed fee they pay will be fully recoverable from the opponent even if successful.

Worked Example 1.8

A client asks for a fixed fee for defending a complex, high-value commercial dispute. The solicitor explains that the unpredictable nature and scope of the case make a fixed fee unsuitable. Instead, the solicitor offers an hourly rate with regular cost updates.

Answer:
This is correct. Fixed fees are not suitable for complex or uncertain matters where the time and resources required cannot be reliably estimated.

Summary

Key Point Checklist

This article has covered the following key knowledge points:

• A fixed fee is a set price for a defined legal service, agreed in advance.
• Solicitors must provide clear, written information about fixed fees, scope, and any possible extra charges.
• SRA Code of Conduct and Transparency Rules require best possible information on costs, publication of pricing for specified services, and clear timescales and complaint signposting.
• Fixed fees are best for routine, predictable matters with clear scope; staged or capped approaches can be used for more complex work.
• In litigation, explain solicitor and client costs versus costs between the parties and the impact of fixed recoverable costs on likely recovery.
• Handle client money, advance payments, VAT, and disbursements correctly under the SRA Accounts Rules.
• If the matter becomes more complex, solicitors must warn clients and agree new fees.
• Solicitors remain responsible for counsel’s fees and should seek money on account and informed consent where counsel may be instructed outside the fixed fee.
• Ethical duties require solicitors to act in the client's best interests, avoid unfair advantage, and not compromise quality for profit.
• Referral and fee-sharing arrangements must be disclosed; referral fees are prohibited in personal injury claims.
• The Legal Ombudsman can limit fees if complaints are upheld; courts can set aside unfair or unreasonable contentious business agreements.

Key Terms and Concepts

• fixed fee
• scope of work
• SRA Transparency Rules
• informed consent
• disbursement
• client money
• solicitor and client costs
• costs between the parties
• contentious business agreement
• statute bill