It is said that legal services do not come cheap all over the world. The scenario is the same here in Kenya. Entrepreneurs and small business have always complained that lawyers in this country are damn too expensive for the services they render. Worst hit are start-ups who have to struggle with the cost of setting up their businesses. I believe it is important to demystify how lawyers, just like other professionals, charge for their services. Lawyers are guided by the following in deciding what to charge;
1. Advocates Remuneration Order
Section 44 of the Advocates Act CAP 16 Laws of Kenya gives the Chief Justice power to make orders relating to the remuneration of Advocates for both contentious and non-contentious work. This section is the basis for the Advocates Remuneration Order 2009.
The Advocates Remuneration Order sets the minimum charges that an Advocate may charge for services. Clause 3 provides that “No Advocate may agree or accept his remuneration at less than that provided by this Order.” Section 36 of the Advocates Act prohibits undercutting. Undercutting is basically charging legal fees at a lower amount than what is prescribed by the Advocates Remuneration Order. Section 36 makes it an offence for lawyers to undercharge yet this practice is very rampant in the country. The Advocates Remuneration Order 2009 has been reviewed and the Chief Justice is expected to publish a new order anytime soon. This is bound to increase the cost of legal services in Kenya.
The value of the transaction is also considered in calculation of legal fees. The Advocates Remuneration Order takes into consideration the value of the ‘claim’ or ‘transaction’ that is at stake. The order has varying percentages for calculating fees for various value transactions for example the total purchase price of a property, or the value being claimed by a plaintiff in a civil suit.
2. Complexity of Work
Lawyers consider the nature of the work they have been instructed to do in order determine how much fees to charge. Complexity of the work and the duration it will take to complete the same is considered when determining the appropriate fees taking into considerations the minimum fees set out by the Advocates Remuneration Order as discussed above.
Simple and straight forward instructions that will not take much of the lawyer’s time will be charged at a lesser rate than instructions that require a lot of time, research, preparation and documentation by the lawyer.
3. Expertise and experience
Besides the set standards and complexity of the work involved, lawyers also consider their expertise and experience in the field. Senior lawyers who have many years experience in any particular field will not come cheap. They always factor their seniority and experience in their billing. The legal fees charged by junior lawyers will be nowhere near that of senior lawyers. The same applies to other professionals like doctors and engineers though they, seniors and juniors, are well trained and authorized to practice in their respective fields.
4. Overheads and auxiliary expenses
Lawyers, like any other professionals, have overheads to take care of in the course of business. Legal practice is a business just like any other business and lawyers have overheads like rent for office space, salaries for support staff and paralegals, insurance premiums for professional indemnity (malpractice insurance) cover, I.T and infrastructure support and maintenance among other expenses. For example, a sole-proprietor with a small firm with one or two paralegals will more often charge lower fees than a large partnership that has many partners, associates and paralegals and a large office. A law firm or partnership with a professional indemnity (malpractice insurance) cover for Kshs 100,000,000.00 will definitely not charge the same legal fees as compared to a law firm with a cover for Kshs 1,000,000.00. These expenses are always factored in the cost of legal services.
These are just some of legal fees pricing factors and the list is not exhaustive. Different lawyers have different ways of charging legal fees over and above the minimum allowable fees.
In order to be competitive, entrepreneurs, small businesses and start-ups are advised to always negotiate for better fees but within the limits set by the law. Unfortunately people have been cheated out by quacks and persons masquerading as lawyers for cheaper legal services. The importance of using qualified lawyers cannot be gainsaid. Section 31 of the Advocates Act makes it an offence for unqualified persons to act as advocates. Section 34 prohibits unqualified persons from preparing legal documents and under section 35 such documents cannot be registered by the Registrar of Companies and Lands Registrar.
Start-ups and small businesses should therefore learn to budget for legal fees in order to have a smooth time when setting up shop and running their business.