The Law Society has approved a limit for referral fees based on a percentage of the legal fee. Effective April 27, 2017 a lawyer may pay another lawyer or paralegal a referral fee of 15% for the first $50,000 of legal fees and 5% of all legal fees thereafter, to an absolute maximum of $25,000.
The new rules are clearly aimed at the new business of getting personal injury claims and then passing on the work to another lawyer or law firm in exchange for a referral fee. Reports indicate that referral fees have become a significant portion of some lawyers’ practices.
Other measures to increase the transparency of referral fee arrangements were also approved. These include:
- The client, the referring lawyer or paralegal and the lawyer or paralegal accepting the referral must sign a standard referral agreement, as provided by the Law Society.
- The account to the client must clearly indicate the amount of the referral fee.
- The client must sign an acknowledgement for the referral payment at the time the payment is made.
- Lawyers and paralegals must record referral fees paid and received in their books and records and report on referral fee practices in the annual reports they submit to the Law Society.
The limit and these other measures were recommended by the Law Society’s Professional Regulation Committee to address concerns that certain fee arrangements may be misleading or detrimental to clients.
At McNally Gervan we charge reasonable fees and are up front with our clients about any referral fees. If you have personal injury or insurance claim do not hestitate to contact us for a free assessment.