Fees and Disbursements— What are they?
When looking to agree to representation with a lawyer in Ontario, you are very likely to see a provided retainer or engagement letter referring to the terms “fees” and “disbursements” in regards to billing. Fees are straightforward— they refer to amounts charged to the client for legal services rendered. Depending on the circumstances, they may come in the following forms:
An hourly rate, charging for only the time spent on your file,
A fixed, or flat fee, charging a flat amount for a particular task regardless of the time it takes to complete the task, such as the drafting of a will and an accompanying power of attorney,
By stages, charging for a file as it progresses; frequently an estimation of the cost for each stage is provided.
On a contingency fee basis, where any part of the fee is dependent on the success of the file resulting in any collection of fees. This is a common fee type particularly in litigation, in which the fee owed to your lawyer will likely be a percentage (e.g. 40%) of all amounts received from the opposing party to a claim, whether obtained through settlements or court decisions.
On the other hand, “disbursements” broadly refer to expenses that a lawyer will pay on your behalf, for the purposes of completing your file, of which they are entitled to be reimbursed. However, lawyers are not permitted to incur a profit on disbursements and are expressly prohibited from charging the client more than the actual cost of the disbursement. In some circumstances, taxes may be applied to disbursements as categorized and outlined by the CRA. Common disbursements may include but are not limited to:
Necessary transportation costs,
Costs of couriers and postage,
Expert reports and property inspections,
Administrative and filing fees
For various practice areas, some disbursements are more common than others. For real estate transactions, it is likely to see the following disbursements:
Title search fees:
In a real estate file, your lawyer must complete a title search through Teraview for the purposes of confirming that there are no issues with the property’s title and that there are issues or encumbrances which may affect the purchase or sale of the property. Teraview is the software which lawyers use for the purposes of accessing, registering, and managing records from the land registry, the use of which resulting in fees to be paid for the upkeep of Teraview and its related services.
Registration fees:
Your lawyer must pay two fees every time there is a new register for a title transfer, a new mortgage, or any other document on a property’s title. These two fees are: a statutory fee, charged by the government, and an Electronic Land Registration Services Agreement (ELRSA) fee, charged by Teraview.
Tax certificate fees:
A tax certificate details a property’s tax status. This will list whether or not the property as any owing property taxes and whether any tax arrears are present owing on the property. Upon sale of a property with unpaid taxes, these taxes will be paid from the proceeds of the sale, however, the municipality collecting that tax will charge your lawyer a fee to obtain that tax certificate for review, the cost of which varying between tax offices.
Status certificates:
If looking to purchase a resale condo, your lawyer will likely advise you to obtain a status certificate. These documents outline critical information about a condo unit and the condo corporation. The status certificate provides essential information about the physical and financial situation of the corporation, including any outstanding or expected claims or liabilities, major projects, or costs, in a transparent manner. This includes condo fees, a history of any increases to those fees, and any known potential fee increases. This is important information for any purchaser to have, as these status certificates legally bind condo corporations and may be able to act as notices of unexpected fees that may be charged by the condo corporation later. Condo corporations may charge up to $100 plus tax for a status certificate and must provide it within 10 days.
Transaction levy surcharge:
Transaction levy surcharges are fees charged by the Law Society of Ontario. This is a fee added onto some services including a real estate transaction. However, the transaction levy surcharge may be waived in purchase transactions where the buyer also purchases a title insurance policy.
Execution search fees
If a person has failed to satisfy pay their debts, a creditor may file an execution, permitting them to seize a person’s property to pay off the debt owed. This can include real estate property. Because of this, when selling a property, your lawyer must search for executions against your name. An execution against a client’s name may affect your ability to sell or transfer the property, leading to delays and greater complications in the transaction. If there is an execution against the client, this must be addressed and may involve other legal action.
The information and comments herein are for the general information of the reader and are not intended as advice or opinion to be relied upon in relation to any particular circumstances. For particular application of the law to specific situations, the reader should seek professional advice.