Law firm lottery
6 November 1996
Charity may begin at home, but the majority of charities surveyed by The Lawyer believe it may also stretch to the offices of a law firm; 65 per cent say their legal bills are "costly but acceptable".
Only 10 per cent of the charities consider the fees charged by their external legal advisers are "excessive". One respondent says: "Per hour charges of £240 can only be described as impolitely excessive." Perhaps unsurprisingly, the 15 per cent of charities that say the services of their external advisers rate between "reasonable" and "value for money" are those whose annual legal budget is £25,000 and under - over 80 per cent in this category singled out efficiency as the main criterion for selecting a law firm.
The questionnaire was sent to the top 200 charities rated by income, which (according to The Henderson Top 200 Charities 1996) ranges from almost £430 million to £9.6 million. And within that funds range from £6,983 million to £150,000.
But irrespective of the size of funds handled, charities, like commercial clients, are becoming more cost-conscious. This is also evident in the fact that 66 per cent of charities normally instruct two or more firms at the same time and will shop around for the right lawyer.
This cost-consciousness can also be seen in the sums charities spend on annual legal bills. The Lawyer survey found that 35 per cent spend up to £25,000 on external legal services, with the same proportion spending £25,000-50,000; 16 per cent spend £50,000-100,000 and 12 per cent pay £100,000-500,000. Only 2 per cent of the charities spend over £500,000 a year.
Peter Mimpriss, Allen & Overy partner and chair of the Charity Law Association, says that as a result of the "general shake-up", as well as the greater demand to raise additional money to comply with the requirements, charities are having to become more commercial as donors expect to see them run efficiently. "But this can be difficult as the people with the begging bowls are approaching the same people so charities are having to look much wider and become more entrepreneurial in they way they raise money."
Over 70 per cent of charities expect their legal expenditure to stay the same, and the minority expect it to increase. This may be a result of recent legislation as well as the National Lottery.
The lottery has certainly had an impact on one organisation. The publishing arm of the Consumers Association, sold on subscription with a prize draw, seems to have suffered with the popularity of the lottery. But head of legal affairs Ashley Holmes concedes there have also been positive consequences because "the idea of the lottery has obviously changed the culture". He says the public believes that charities will eventually benefit, which will also result in more work for their professional advisers.
The charities are also aware of the increase in activity and are becoming more discerning in selecting a law firm. On the checklist of criteria for choosing a legal adviser: 35 per cent say specialist legal knowledge is the most important factor; 25 per cent believe efficiency is the main consideration; and 23 per cent consider responsiveness to their requests was the most important factor. Cost, partner level contact, communication and personnel continuity were all also cited as relevant factors.
For the majority, the size of the firm and level of contact with partners were the least important. One charity says it would "look for an empathy with the sector and an understanding of our particular ethos". Another says: "Most problems arise because of the lack of background knowledge of partners and associates. To resolve this, we instruct different firms (at different charge out rates) but requiring named partners or associates to handle all work."
There is no such thing as gambling by charities in their choice of lawyer.