Terms of endearment

Many solicitors still dislike terms of engagement letters, but used properly they improve quality, efficiency and even increase fees

The Journal, April 2004, page 11

By now, all conveyancers will be accustomed to sending out terms of engagement letters. The larger firms have been sending them out for years, for every kind of transaction.

Some of the letters I have seen have been pretty poor, others were not that good and some were clearly designed never to give their authors’ position away to the enemy. A common ploy is to make them unreadable, so that the client gives up long before page 2.

I have been advocating the use of engagement letters for years, and not just for conveyancing. And I have come up against some wonderful excuses for not using them.

Excuses, excuses

“If my client wants to know anything, he can ask” is a common one. But your client is nervous and doesn’t want to ask you questions to which, he thinks, he already ought to know the answers. One solicitor even told me that, if a client asked him about fees, he would tell him about fees, but only fees, not outlays.

“We’re only making a rod for our backs” is another excuse. But well-drafted engagement letters should help you to avoid complaints, not generate them.

These excuses hold no water. As the providers of complex services, we have a duty to tell our clients what we will be doing for them.

There is no more uncomfortable client than the one who does not know what you are doing for him, how long it’s going to take and what it’s going to cost him. And a client you have made uncomfortable is hardly likely to recommend you to other people.

The piece of string

Another excuse is that we don’t know how much a piece of work is going to cost.  “How long is a piece of string?” is one of our more popular sayings, ahead even of “This business would be great, if it wasn’t for the clients.”

Executry lawyers don’t quote fees, partly because of the work involved in producing a quote, if you haven’t done the necessary background study. However, more often, I suspect, the reluctance to quote is because the lawyer is afraid of what his clients will think of the enormous fee.

Don’t worry. If you can quote a fee when no-one else will, the client is more likely to go to you than to anyone else. And wouldn’t you rather get the fee agreed before you start work than endanger the client relationship by charging a huge fee after the work is completed? Only the quoted fee is a sound basis for a long-term relationship.

Court lawyers are terrified of quoting fees to their clients. Their pieces of string can unravel in many different directions. But they should be prepared to warn their clients of the possible costs and, at the very least, the method used to calculate them.

Quality, efficiency and more money

A recent English survey produced the startling figure that almost 50% of clients believed they had not been told of outlays, when 95% of their lawyers were convinced that they had been told. Engagement letters provide a useful form of risk management.

They improve quality, by telling the client more than they have asked for, particularly if supported by a booklet describing the service. And they help with efficiency, by reducing the time you would otherwise waste in verbal explanations.

But, if that’s not enough for you, try this:  engagement letters can make you money.

Look at your home insurance policy. It stipulates what is covered by the policy and what is not covered. Your engagement letter should tell the client what work is covered by the fee you have quoted, and what is not.

In conveyancing, you could exclude from your quoted fee work in connection with title problems, unauthorised alterations or post-completion problems, enabling you to charge an extra fee for that work.

In court cases, you can require a payment in advance, with additional payments as the case progresses and a right to stop work if the payments are not made.

In executries, you can deal with interim payments and explain that any fee quoted does not include IHT negotiations.

But a single letter covering all services will not do. It will be too long, vague and incomprehensible. We need different letters for each service, easy to read, containing no jargon or legal terms. They can even be customised for each partner, to allow for those intriguing little differences in style.

So, take some time –  prepare quality letters of engagement and use them intelligently. They are good for you and your business.