Question of Ethics

January 2014

What is the difference between a fixed fee arrangement and agreed fees?

Q. I would like to offer a fixed fee arrangement to my clients so that they can be clear about their costs position. The monies will be paid upfront and they will be billed for the agreed sum at the end of the retainer. I understand this is an agreed fee under Rule 17.5 of the SRA Accounts Rules 2011 and that the monies must go in to the office account. Is this correct?

No. Fixed fees and agreed fees are two distinct types of arrangement and must be treated differently to comply with the accounts rules.

Fixed fees are usually set at the beginning of a retainer and are payable on completion of the work required e.g. Divorce (excluding ancillary relief) £300 plus vat. Where you require costs on account of this fixed fee (as above), the costs must be paid into the client account in the usual manner. These monies have the usual protections for clients as they remain within the client account. At the conclusion of the matter, a final bill is delivered to the client in the usual way and the monies then transferred to the office account in accordance with rules 17.2 and 17.3.

An agreed fee is a fee, the terms of which must be evidenced in writing and must be paid into the office account. The fee cannot be varied upwards and is payable, by the client, whether or not the work is completed. The money does not have the usual protections afforded to clients as it is office money, belonging to the firm. You must ensure that you have achieved the relevant outcomes in Chapter 1 of the SRA Code of Conduct 2011 and that clients signing up to an agreed fee are aware of the implications of paying it and consent to this before any payment is made.

Fixed fees have been used for many years by the profession, particularly in conveyancing matters. Agreed fees are commonly used by criminal law practices and other practices where the firms do not maintain a client account.