From:        Property Partner

Sent:        15 October 2009 11:27

Subject:Finance – Collecting Fees at Completion – Please Read

Property Lawyers

You’ve all had the training so none of what follows should be news to you.

I am aware of a number of matters which have completed in the past week where we received substantial sums of money from our client to effect completion. In every case that I am aware of we did not collect our fee at completion. Why not?

If you don’t understand why this is an issue, I will explain a bit more below in, admittedly, pretty facetious terms.

In one case, the completion monies which we recieved from our client included the price, the VAT on the price, the SDLT, our agent’s fee, the seller’s agent’s fee and the seller’s solicitor’s fee. The completion monies did not include our fee. So, whilst the Seller, the two agents, the seller’s solicitor and Alistair Darling have been paid thanks to the exceptionally talented Burges Salmon lawyer who made the deal happen, the firm that is Burges Salmon is left to fund luxuries such as rent, electricity, phone bills and staff salaries out of thin air or, we hope, our own reserves.

It gets worse when you consider those pesky things called disbursements (you know, search fees and the like). The matter in question has disbursements of over £1,000 – which we have kindly paid on behalf of our client over a period of seven months. Crikey – that was nice of us.

So we are a law firm; not a bank. Despite that, we have given the client a 9 month interest free loan. So we are a bank, a nice bank in fact; just not a very good one. Assuming we do get paid at some point the recovery rate is likely to be at a level where it has actually cost the firm money to do the job. So, we’re not a law firm; we’re a nice but rubbish philanthropic bank.

Have I mentioned the recession yet? One of the many consequences of the recession, sadly, is that companies go out of business. Some of those companies will be clients of this firm. We have already had a number of clients fall victim to the recession, leaving us totally exposed on fees. If our client goes bust; we don’t get paid. Ever. In those situations we cease to be a bank; we become a charity; a nice charity.

Hopefully, the message is a clear one. We are a law firm; not a bank nor a charity. There is lots of good lawyering going on which will be worthless if we do not convert it so we need to become much more streetwise when it comes to financial matters. The default position on any matter (subject to those which are on monthly/quarterly billing) is that we render the bill (and collect the cash) at exchange/completion.

As ever, please address any questions to any Partner.

Partner