Law Society moves decisively to protect public by capping referral fees

Toronto — In a move to further protect the public, the Law Society of Upper Canada’s governing board today approved a cap on the fees a lawyer or paralegal may charge for referring a client to another lawyer or paralegal. Related regulations were also approved to increase transparency in fee arrangements and prohibit referral fees in certain circumstances.

The new requirements are outlined in a report developed by the Law Society’s Advertising and Fee Arrangements Issues Working Group, following serious concerns that certain fee arrangement practices are misleading or detrimental to clients.

The referral fee cap is set at 15 per cent for the first $50,000 of legal fees and five per cent for each subsequent amount, to an absolute fee cap of $25,000.

“By setting a cap, and prohibiting certain referral fees, the Law Society is making sure that these arrangements serve the client’s interest, first and foremost,” says Law Society Treasurer Paul B. Schabas. “The standardized agreement will ensure people fully understand their rights, the fees involved and the referral process.”

Highlights of the approved recommendations include:

  • A standardized form for referral fees.  
  • A requirement to provide the client with a choice of referrals. 
  • A requirement for lawyers and paralegals to record referral fees paid and received in their books and records and to report on referral fee practices in the annual reports they submit to the Law Society. 
  • A prohibition on up-front referrals and the payment of referral fees to lawyers and paralegals whose licences have been suspended by the Law Society Tribunal.  
  • Continuing to prohibit paid referrals when the referring licensee has a conflict of interest. 

“People benefit from carefully considered referrals from a trusted lawyer or paralegal and we must ensure there is room for legitimate referral services,” says Working Group Chair Malcolm Mercer. “These changes are intended to protect the public by ensuring that referral fees are transparent, fair and reasonable.”

The Working Group continues to consider contingency fee arrangements and fees and advertising in real estate. Further reports are expected.

For more information, see Q&As and the Advertising and Fee Arrangements Issues Working Group page at www.lsuc.on.ca/advertising-fee-arrangements

The Law Society regulates lawyers and paralegals in Ontario in the public interest. The Law Society has a duty to protect the public interest, to maintain and advance the cause of justice and the rule of law, to facilitate access to justice for the people of Ontario and act in a timely, open and efficient manner. 

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Media contact: Susan Tonkin, Communications Advisor, Media Relations, 416-947-7605 or stonkin@lsuc.on.ca.

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