Charging where a firm is still trading

A Guide to Good Professional Conduct for Solicitors (3rd edition) provides as follows at para 10.8: “Where a solicitor is required to make a search for papers and documents, or to schedule documents of a former client, he may charge a reasonable administration fee for the work involved”  and “when a file is being transferred, if the solicitor wishes to copy the file to comply with the Solicitors Accounts Regulations, or for other administrative purposes, this must be done at the solicitor’s own expense.”

If a former client of a firm wishes to take up their file, an administration fee may be charged by the firm where there are costs incurred by the firm in the transfer of the file. The client has chosen to leave the solicitor. The solicitor incurs administration costs as a result of this decision by the client.

Charging where a firm closes

When a firm closes, and the goodwill in the firm, or in various parts of the firm (batches of files), is sold or transferred to another firm there is no basis on which it would be appropriate for a fee to be charged when clients look for their files at the time of the closure. The firm had entered into a contract for legal services with the client and the firm is now withdrawing from that contract and closing the firm. In other words, the solicitor has left the client, the client has not left the solicitor.

Transfer of files to a new firm

The files and client moneys are transferred to the new firm(s), simply to be held until that firm receives confirmation of instructions from each individual client. The retiring solicitor should notify all clients of the closure and advise clients of their options. The retiring solicitor has no authority to instruct the second firm in any clients’ affairs.

If the client of the former practice does not want to instruct that firm, their files must be released to them. The files do not belong to the second firm until the client instructs that firm. The client should not be charged a fee to get back their own file/client money.

Wind-ups

If a practice is not sold or transferred, it must be wound up. This involves the principal/partners writing to the current clients of the practice, informing them of the closure and asking them to take up their file and client moneys or to nominate a new solicitor to do so. No fee should be charged at that time. The solicitor is withdrawing from the contract for legal services, not the client.

Charging clients who do not respond to invitation to take up files

If a client who has received an invitation to take up their files or instruct the new firm does not respond within a reasonable period, but subsequently contacts either the retiring solicitor or the new firm looking for the file, a fee for dealing with this request may be then be charged.

It is recommended that solicitors should notify clients, at the time of the closure of the firm, that if they do not take up their files or instruct the new firm within a specified period (six months being a reasonable period), a charge for storing/distributing the file will be incurred.

Liens

Irrespective of whether the files are transferred to a new firm or the retiring solicitor winds up the practice him/herself, the exercise of a lien on the client’s file is not usually appropriate. This issue should be decided on a case-by-case basis. A solicitor’s lien on files is limited to the solicitor’s right to have possession. Once a solicitor ceases to practise, or is suspended from practice, the basis on which the solicitor had possession of the files no longer exists and the solicitor must divest himself of all practice material immediately. Fees for work properly done can be billed by the solicitor, and the debts due can be collected by the solicitor, or on his behalf, in the normal way.

This practice note applies both to practices closed following regulatory action taken by the Law Society and to practices closed following a decision to close made by the principal or partners of the firm.