September 01, 2015

Sample Real Estate Law Engagement Letter

Dean Alterman
From How to Build a Real Estate Practice, Appendix 1                              

The following is a detailed engagement letter for a new client.

(date)

Morrison and Charlotte Horner
Horner Family LLC
1234 Wiley Place
Somewhere, Oregon
Re: TransitCorp condemnation

Dear Mr. and Mrs. Horner:

Thank you for asking us to represent Horner Family LLC in TransitCorp’s proposed condemnation of the property at Main Street for the Main Street transit terminal. We appreciate the chance to be of service.

This letter sets out the basic terms of our engagement. I’ve divided it into sections for ease of reference.

Our Client1

Horner Family LLC, a limited liability company of which I understand you are the sole members, is our client for this engagement. We will treat instructions from either of you as being instructions of Horner Family LLC.2 In other parts of this letter, “you” and “your” refers to Horner Family LLC unless the context requires it to mean you individually.

Scope of Our Engagement

The scope of this engagement is to negotiate with TransitCorp on the purchase price of your property at Main Street, which TransitCorp wishes to condemn for a public transit project, and to defend the condemnation in court if negotiations are not successful.3

Our Fees and Invoices

We usually figure our fees based on the hours we work on your behalf.4 My current hourly rate is $X. Other lawyers in the firm have rates that range from $Y to $Z. When our staff act as legal assistants (i.e., performing work typically done by legal assistants that goes beyond the merely clerical), we charge $W per hour for their time. Our hourly rates are subject to change, which I expect to do at the beginning of each year.5 The hourly rates we charge will be those in effect when we do the work. We will ordinarily send you invoices monthly and payment is due to our office within 30 days.

You have the right at any time to terminate our services, but you will still be responsible to pay for the services we rendered and expenses we paid or incurred on your behalf before the date of termination, or in connection with the termination (as, for example, if we provide services or incur expenses in the course of transferring the matter to successor counsel).

We reserve the right to withdraw from this representation if, among other things, you do not honor the terms of the engagement letter or representation and fee agreement,6 or if any circumstance arises which would or could, in our view, render our continuing representation unlawful or unethical. If we elect to withdraw, we will be entitled to be paid for all services rendered and costs and expenses paid or incurred on your behalf to the date of withdrawal.

Our Costs and Disbursements

We will bill our costs and disbursements to you with a reasonable explanation of what they are and who we paid. “Costs and disbursements” means money that we pay to third parties on your behalf or as part of representing and advising you. In business matters, these include recording fees, fees charged by agencies for copies of public records, travel costs, parking costs (if we drive somewhere on your behalf), delivery fees charged by courier services such as Transerv, FedEx, DHL, and the like.

We do not charge you for routine postage.7 Those costs are part of our overhead. If we send things by certified or registered mail, or if we have to do a mass mailing for you, then we will charge the actual cost of the postage. Similarly, we do not charge you by the page for routine copying in our office.8 Those costs are also part of our overhead. If we send a large copying job to an outside service, then we charge you what the service charges us. If we do a large copying job for you in-house (for instance, if we’re making copies of long loan or lease documents), we may charge you the same rate per copy that an outside vendor would charge us.

Our long distance telephone vendor charges us 5 cents per minute for domestic long distance. Because that rate is so low, we do not bill you for telephone tolls for domestic long distance. Our international long distance rates are higher, and we bill international long distance at our actual cost. If in the future we can’t get domestic long distance at this low cost, we may charge telephone tolls for domestic long distance at our actual cost.

Disputes

If any dispute arises about our fees and charges, the law of the state of Oregon shall apply, and the fee dispute shall be resolved by binding arbitration pursuant to the Oregon State Bar fee dispute program.9

File Retention

When our engagement on any matter is completed, we will close the file and return to you original documents that we obtained from you. We do not keep closed files indefinitely and will destroy our file on this matter ten years after we close the file, unless we determine a shorter period to be appropriate.10

Other Engagements

If you engage us to do other work for you, the terms of this letter will govern those engagements unless we send you a separate engagement letter for the other work that contains different terms.11 The terms of that separate engagement letter will apply to that engagement and will prevail over any inconsistent terms in this letter.

To indicate that you accept these terms, please sign and return a copy of this letter to us. A faxed (503-555-1212) or e-mailed (lawyer@samplelawfirm.com) copy is fine. Thank you for asking us to advise Horner Family LLC on this matter.

Very truly yours,
SAMPLE LAW FIRM LLP
Robert J. Sample
ACCEPTED:12
Horner Family LLC:
Morrison Horner, Member Charlotte Horner, Member
November ____, 20___ November ____, 20___

Endnotes

1. A good engagement letter will make it clear whether an individual or an entity is the client. In this letter, I’m stating that the LLC is my client.

2. When an entity hires me, I want to identify the persons from whom I will take instructions on behalf of the entity. This sentence means that until I find out about an actual disagreement between Morrison and Charlotte, I don’t have to check with both of them before acting on behalf of Horner Family LLC, but can accept instructions from one.

3. Always describe what you’re being hired to do so that the client doesn’t later say that you did too much work (for which the client doesn’t want to pay you) or too little work (leaving the client exposed to liability for which the client wants you or your insurance carrier to be responsible). This description of the scope of the engagement identifies two specific tasks: (1) negotiate and (2) litigate. It does not include giving advice on other matters related to the condemnation, such as tax consequences, environmental questions, and dealing with tenants of the property.

4. This sentence states that my fee is based on my ordinary hourly rate, but is not a commitment that my fee will always be hours times rate.

5. If you state your hourly rate in your engagement letter, reserve the right to change the rate from time to time. If you state that you will charge $X/hour for the engagement and the engagement lasts for several years, and you haven’t reserved the right to increase your rates, then you will be locked into that rate for the life of the engagement.

6. I’m saying in a polite way that I have the right to stop work if the client stops paying my invoices.

7. Many firms charge for postage, sometimes offending their clients who don’t cavil at paying a large fee, but object to being asked to pay a few cents extra for what in their own businesses is simply part of the cost of doing business.

8. As I do with postage, I look on copying as part of my overhead.

9. If your state bar has a fee arbitration program, offer to settle fee disputes through the program.

10. I tell the client in the engagement letter that I will not be his file repository and off-site document storage provider forever.

11. You may not want to send an engagement letter for each matter to a client who hires you steadily for a succession of small matters. This clause says that the general terms of this letter will apply to future engagements unless you send a specific engagement letter with different terms. For example, if I’ve sent this engagement letter to a new client to take on an hourly matter, and then later on propose to handle a new matter with a contingent fee, a flat fee, or a success fee, I will send an engagement letter for that matter that describes the specific fee agreement for that matter and will state that the fee agreement applies to that matter only.

12. Provide a space for your clients to sign to indicate that they have read and approved the terms of the engagement and are hiring you.

Entity:
Topic:

Dean Alterman

Dean Alterman’s varied career includes eight years as a real estate agent and three years as chairman of a county planning commission. He has practiced real estate and business law in Portland, Oregon since 1989. After working for three other firms (one of which closed its doors forever twelve weeks after he arrived), he opened his own office in 2006, growing it to a four-lawyer firm and then becoming a founding partner of Folawn Alterman & Richardson LLP in 2009, where he now works. He frequently gives presentations and publishes articles on real estate topics