There is a common misconception that legal costs are fixed and that lawyers should be treated differently than other vendors who are subject to the rules and requirements of a competitive bid process. Not so, says James A. Judge, Esq., an attorney with the Irvine, Calif.-based law firm of Van Gemert and Judge. Judge recently discussed the topic of escalating legal fees and how associations can control their costs at a Community Associations Institute (CAI) seminar during its national conference.
"Where other vendors are subject to a competitive bid process for virtually every piece of work, the lawyers usually escape having to give a firm price for their work, and generally are given every assignment, together with a blank check," says Judge.
Legal services are like anything else a competitive business, says Judge, and a good experienced lawyer should be able to give a reasonable estimate how much settling a legal dispute will cost. "While legal costs are often difficult to predict, make no mistake—most good lawyers know what a dispute or transactional matter is going to cost, if they have sufficient experience."
Not a Blank Check
It's not uncommon for community associations and boards to rack up thousands of dollars in legal bills over what may seem like a simple matter, Judge says. Be wary of some of the following ways in which legal costs can escalate:
Failure to Budget Properly Legal costs generally are cyclical with the economy. In good times when homeowners are current with their assessment payments, associations have more money to spend and tend to spend more on general counsel work and less on collections. In bad times, money is tight, making general counsel decisions more difficult and more work and money is diverted to collect delinquencies. There are in the economy, and in the history of every association's budget predictable economic trends that offer invaluable information as to not only the total amount of money that must be allocated to legal services, but how it is to be spent.