Conditional Fee Agreements Explained
When a solicitor agrees to take your claim on a "No Win, No Fee" basis, you will be asked to sign a Conditional Fee Agreement or CFA.
The CFA is a type of legal funding agreement. It sets out the terms under which your solicitor will be paid.
How does a Conditional Fee Agreement work for you?
Under normal conditions, your solicitor would charge an hourly fee for every man hour it takes to handle your personal injury claim. Some solicitors might also ask for an upfront fee to put together the facts of the case.
A Conditional Fee Agreement is different. Under this arrangement, a solicitor will not charge you for their work if your claim is unsuccessful. You do not a pay a penny upfront, and you do not pay your solicitor at all if you lose the case.
If you win, then the Defendant will pay most of your legal fees. In addition, your solicitor will charge a "success fee" to recognise the risk of them not getting paid.
The success fee is a percentage of your settlement or damages award. This is paid to your solicitor from your compensation at the end of the case.
How does a Conditional Fee Agreement work for the solicitor?
A CFA passes all the risk of proving the claim onto the solicitor. This means that a solicitor will only take your case if they believe that you have an excellent chance of winning.
The solicitor is also motivated to negotiate the maximum amount of damages since they will want to make sure that your compensation covers at least their basic charges.
What should I consider before signing a CFA?
Success fees vary between solicitors, so it is important to be clear of the percentage before you sign a CFA. Most law firms will charge 25% of your compensation since this is the maximum permitted by law. Others will deduct a lower percentage.
A small percentage difference may not sound like much but it can make a difference of many thousands of pounds.
Suppose, for example, that a motorist emerges into the path of a cyclist causing a severe arm injury that requires surgery. The cyclist agrees compensation of £20,000.
With a 25% success fee, the solicitor would deduct £5,000 from the settlement award and the cyclist would retain £15,000. But if the success fee were 15%, then the solicitor would deduct just £3,000, allowing the cyclist to keep more of his compensation.