New fees pinch buyers

Property buyers are coming to terms with increased legal fees gazetted by Chief Justice Willy Mutunga in April.

Property lawyers have over the past three months been charging higher fees for property transactions in line with the new Advocates Remuneration Order (ARO). The fees were raised by over 40 per cent.

For instance, before increment, buying a property worth Sh5 million would attract legal fees of about Sh75,000. But now, it costs a buyer at least Sh100,000 in legal fees, depending on transaction complexities.

Minimum fees

The ARO mainly prescribes the minimum fees that lawyers should charge clients per transaction.

The new remuneration order followed a series of stakeholder consultations, including the Commission for the Implementation of the Constitution and the Competition Authority.

Others are the Architectural Association of Kenya (AAK), Kenya Bankers Association (KBA), Association of Professional Societies in East Africa (APSEA), Law Society of Kenya (LSK) and economists.

As investors in real estate come to terms with the increased legal fees, a section of prospective home buyers are grumbling over the logic of fixing legal prices in an open and free economy.

They argue that legal fees should be determined competitively by market forces than be vested in the Chief Justice.

According to Section 44 of the Advocates Act, the Chief Justice has powers to prescribe the remuneration of lawyers as he thinks fit upon consideration of recommendations by LSK Council.

Currently, a section of buyers of the popular one-eighth acre plots on the outskirts of Nairobi are accusing lawyers of not willing to bargain on legal fees.

In legal practice, undercutting (bargaining on legal fees or charging below the stipulated scale) amounts to professional misconduct. The cost of legal services is left to an agreement between the advocate and client

Avoid misunderstandings

There are situations when clients accuse advocates of allegedly increasing professional fees midway through transactions. Therefore, written agreements are the easiest way to avoid future misunderstandings between the lawyer and the client.

Most law firms charge required fees, as illegal or grossly excessive fees may attract the whip of the disciplinary tribunal

The law also provides for written and invalid fee agreements and how disputes involving clients should be resolved. Property transactions are also not the same and there are several other factors that come into play when determining legal fees.

For instance, the amounts in proportion to the value of legal services performed as some transactions are too complex.

Moreover, the time and labour required and difficulty of a matter that would preclude other employment opportunities for the lawyer. Other factors may include fees customarily charged in the area for legal services of a comparable or similar nature.

The experience, reputation and ability of the advocate occasionally come into play when charging fees.

Furthermore, the cost of opening a file in a new law firm would not cost the same as one that has been in practice for over 30 years.

Moreover, time limitations either imposed by the client or circumstances of the representation during the transaction may also have an effect.

Other factors could include the nature and length of the professional relationship with the client and the informed consent of the client.

It is even tougher for advocates as the law further bars them from sharing professional fees with people who are not their peers.

This means it is illegal for a lawyer to bargain and share fees with agents or brokers.

 — The writer is an Advocate of the High Court.