A flat fee or payment per deal: how an estate agency agrees a lawyer’s fee

An agency that closes several deals a month needs a lawyer repeatedly: for reservation and sale agreements, authorisation, escrow, registrations, occasionally a dispute over commission, and on an ongoing basis for template documents. Handling each instruction separately means negotiating a price and a deadline every time. A monthly flat fee, on the other hand, means paying in a quiet month too. The law gives both the agency and the lawyer a great deal of freedom; whether the cooperation works is determined by what is written into the agreement on the provision of legal services.

What the legal profession’s rules allow

A lawyer provides legal services for a fee determined by agreement with the client; failing agreement, the lawyer is entitled to the tariff fee (Section 24(1) and (3) of Act No. 586/2003 Coll.). The Decree on lawyers’ fees recognises a contractual fee that is hourly, a flat fee, a contingency fee and a tariff fee agreed otherwise than at the basic rate, these methods may be combined, and the amount must not conflict with good morals (Section 2 of Decree No. 655/2004 Coll.). For an estate agency the key point is that a flat fee may take two forms:

A flat fee may be agreed (a) for the provision of legal services over a certain period of time or for an indefinite period, (b) for the complete handling of a matter or of a set of matters.

— Section 5 of Decree No. 655/2004 Coll. (unofficial English translation)

The first form is a monthly flat fee for services over a period. The second is a fixed price for a whole deal, that is for the set of acts from reservation to registration. Where the fee is hourly, the lawyer submits, at the client’s request, a time specification of the work performed (Section 4).

Payment per deal

A fixed price for the complete handling of a deal suits an agency with an irregular volume of business, or with deals that differ greatly from one another. Both the agency and the client know in advance what a deal costs, and the lawyer bears the risk that it takes more time. The agreement should state precisely which documents and acts the fixed price covers and what is charged separately, for example a further round of negotiations on changed terms, or a response to a call from the Land Register caused by a party’s error.

With payment per deal it must also be settled who is paying. If the services are paid for directly by the agency’s client and that client is a consumer, the Act on the Legal Profession protects their right to be informed:

In the course of providing a legal service, a lawyer is obliged to inform a client who is a consumer of the legal service of the amount of the fee for an act of legal service before that act commences; otherwise the lawyer is not entitled to the fee.

— Section 18(4) of Act No. 586/2003 Coll. (unofficial English translation)

The only exception is an act that must be performed without delay. It is therefore not enough to agree the price with the agency; the client must know it before the act. Whom the lawyer works for in such a deal is examined in the article the lawyer in a deal brokered by an estate agency.

The monthly flat fee

A flat fee for a period makes sense where there is a steady flow of deals, where the agency needs certainty of capacity and of deadlines and its agents need a lawyer on the phone. The arrangement should contain in particular:

• the scope, that is which types of act are covered by the flat fee, for example templates and their updating, consultations for agents, a certain number of agreements or hours,
• the capacity and its use, including what happens to unused capacity; the Decree does not address this, so the agreement must say so,
• deadlines for the individual types of document and a rule for urgent instructions,
• the price of work beyond the scope, agreed in advance, so that exceeding the capacity is not a surprise on the invoice,
• a regular overview of usage and the manner in which the flat fee is adjusted when the volume of deals changes on a lasting basis,
• duration and termination, so that the cooperation can be brought to an end without a dispute over work in progress.

For a court dispute over commission, the authorisation of an agreement or escrow, it must be expressly agreed whether these are within the flat fee or charged separately; what is included in the price must be listed by name in the agreement. If work beyond the scope is charged at an hourly rate, the agency may request a time specification of the work performed under Section 4 of the Decree. The lawyer may also request a reasonable advance payment (Section 24(1)); if the client fails to provide it despite a written request, the lawyer may withdraw from the agreement (Section 22(3)).

How to decide

Four questions help with the decision: how many deals the agency closes and how regularly; whether the agents need a quick answer during viewings and negotiations, or whether finished agreements within an agreed period suffice; who is to pay for the services, the agency out of its commission or the client directly; and whether, alongside the deals, the agency also needs its own documentation looked after. With a fluctuating volume, an agency on a flat fee may be paying for capacity it does not use, whereas with payment per deal every instruction opens a fresh negotiation on price and deadline. The two forms can therefore be combined: a flat fee for templates and consultations for agents, and a fixed price for each deal. If the agreements for the deals are paid for by clients, it tends to be clearer if the agency uses the flat fee only for its own matters and the client receives the price of the deal in advance directly from the lawyer.

Where the volume of deals is regular, we will set the capacity, the deadlines and the rules on usage according to your figures as part of our flat fee for estate agencies. If you would rather start with repeat instructions at a price list agreed in advance, see our legal services for estate agencies; a separate fixed-price product is also estate agency documentation.