There was a recent discussion on the Corporate Real Estate Group regarding fixed fee billing by attorneys for lease negotiations. The following were my comments:
Fixed fee billing can be of benefit to both parties as long as the attorney and client really know what they are getting. As most of the commentators have noted, fixed fee billing is intended to shift the risk of runaway fees to the attorney and allow the client to work within a set budget per lease. The problem for the client is that the attorney should, knowing that the risk has shifted to the attorney, have a higher fixed fee to account for the risk. An attorney that does not adequately account for the risk is at risk for under charging for their services and ultimately may not pay adequate attention to each of the leases.
Fixed fee billing motivates that lawyer to put in as little time as possible for each lease in order to maximize the lawyers profit and may effect the quality of the legal services provided. With that being said, a lawyer or law firm should be able to reasonably estimate the fees and costs for each lease negotiation based upon a historical average of prior lease negotiations and based upon a certain guaranteed amount of lease transactions over a given period of time. For example, if over the prior 2 years, the attorney has negotiated 50 leases for a total of $100,000.00 it would not be unreasonable to agree to a fixed fee charge of $2,000.00 per lease transaction based upon a minimum of 25 lease transactions per year.
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