What your lawyer must put in writing

Picking a lawyer to handle your house purchase feels like a guess. You ring a firm, someone quotes you a number, and you have no way to tell whether that is normal or whether they are looking after you.

You have more to go on than you think. There are rules about what a firm has to tell you, in writing, before it starts work. If those things do not arrive, that is a real signal, and you can spot it in your first week rather than at the final invoice.

What has to be in writing

Once you hire a firm, it has to give you written information before it starts work for you.¹ That written information is usually called your terms of engagement, the written information a firm must give you before it starts real work on your purchase. It covers what they charge, who will do the work, and any limits on what they are responsible for.

These are the things the rules name, and every item in the list below comes from them.¹ The list is not closed, so a firm can tell you more, but it cannot tell you less.

How they charge, and when you pay. Not only the total. The basis they charge on, when payment falls due, and whether they can take their fees out of money they are holding for you.

Whether they hold insurance. A firm must tell you whether it has cover or not. Professional indemnity insurance is not compulsory for lawyers in New Zealand, and a firm carrying less than the minimum cover the Law Society specifies has to give you those details.²

What the Lawyers’ Fidelity Fund covers. They must tell you what this fund covers, and if they will hold your money in a way it does not cover, they must tell you that too.

Worth knowing what the fund is, because the name sounds broader than it is. It can repay you if a lawyer steals your money. It covers theft only, not mistakes or bad work. It pays a maximum of $100,000 to any one person, and you normally have 12 months from finding out to claim.⁴

On the day the house changes hands, the money passing through your lawyer is the price of the house. So the fund is a backstop against one kind of failure, not general cover.

How to complain. Their own complaints process, plus the fact that the Law Society runs a complaints service and how to reach it.

Who is actually doing your work. Before they start anything substantial, they must tell you the name and position of the person who will have carriage of your file. The person you spoke to on the phone is not always the person who does the work.

They must also tell you about any term that limits what they are responsible for if something goes wrong. The rules let a firm limit its liability, but the limit has to be fair and reasonable, and the firm has to tell you about it.

You can ask for a cost estimate

If you ask for an estimate of fees, they have to give you one.¹ The rule does not say it has to be in writing, so ask for it in writing anyway.

The second half of that rule is the useful part. If it starts to look like the cost will go over that estimate, they have to tell you promptly.¹ You should not find out that the cost doubled when the bill arrives.

Keep it. It is the thing the warning gets measured against.

Where your money sits

When your lawyer receives money for you, it does not go into the firm’s own bank account. They must pay it promptly into a trust account, a separate bank account where a lawyer must hold money that belongs to you. It is kept apart from the firm’s own money, and can only be paid out to you or as you direct.³

Both halves of that rule come from the same section of the Act. It covers money your lawyer receives. Money held by anyone else in the transaction sits under different rules, which this page does not cover.

This is also why the fee question above matters. A firm can often take its fees straight out of the money it holds for you, which is normal, but it has to have told you that up front.¹ It also has to invoice you first, and either have that invoice issued or your written authority before it takes anything.²

What to do if it does not turn up

If you have hired a firm and none of this has arrived, ask for it. You are asking for something the rules already require them to give you, so it is not a difficult conversation to have.

Three things worth knowing about how the rules work, and all of them come from the same rules.¹

What triggers the obligation is them starting work for you, not you signing anything. A retainer is the agreement under which a lawyer works for you. You can have one without signing anything, and even if nobody charges you.

And if something they told you stops being true, they have to update it. A fee structure that changes halfway through your purchase is something you should hear about, not discover.

If asking does not work, the Law Society runs a complaints service, and your firm has to tell you how to reach it.

One thing this does not tell you

None of this says whether a firm is any good at the actual legal work. The rules set a floor for how a firm deals with you. They do not measure skill.

What they do give you is something checkable on day one. A firm that handles the paperwork properly is not proof of anything. A firm that does not is worth a second look.

Conveyancers are a separate profession from lawyers, with their own rules, and this page is about lawyers.

What to ask your lawyer

1. Can you put in writing what you charge and how, before you start?
2. Who will actually be doing the work on my purchase, and what is their position at the firm?
3. Can you give me an estimate of the total cost, and tell me if it looks like going over?
4. Does the firm have professional indemnity insurance?
5. Is there anything in your terms that limits what you are responsible for if something goes wrong?

Say these as they are written. They are normal questions to ask.

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