Let’s talk about the Law Society of Ontario’s (LSO) standard referral agreement. Since the LSO’s rules about limits on referral fees have been around since 2017, most licensees already know that certain maximum limits apply to the amount of money that can be paid or received as a referral fee. That being said, as you can imagine, there is so much more to referral fee compliance than simply staying within these limits. That’s why TrustReq created something called Referral Fee Matter pages, or RFMs for short.
In this article, we’ll focus on the referral fee agreement aspect of RFMs. You may also be interested in the following related articles:
How Ontario lawyers should manage the “Referral Fee Checklist”
The “standard referral agreement” for Ontario lawyers
Paragraph 3 of section 19.1 of By-Law 9 requires that every licensee who pays or receives a referral fee shall maintain a record of all documents related to each referral fee transaction, including any agreement the Law Society may require the licensee to enter into, in relation to each referral fee transaction.
As it turns out, the LSO does indeed have a standardized agreement that must be signed by the licensee receiving the referral, the licensee making the referral, and the client who is being referred. We’ll refer to this agreement as an RFA, meaning referral fee agreement.
You can find the Law Society’s mandatory RFA on their website on their page entitled, “Referral Fees”. The relevant hyperlink is called “Standard Referral Agreement”.
When you take a closer look at the agreement, you’ll notice that it is intended and designed to be customized to reflect the circumstances of your situation, but only within certain boundaries. Rather than navigating the somewhat cumbersome layout and content of this document, preparing an RFA on TrustReq means you’ll just need to answer a few simple questions, and TrustReq will generate a compliant RFA for you.
So let’s talk about how that’s done.
To begin, make sure you’ve already created the relevant referral fee matter, or RFM for short. As we mentioned earlier, the RFM is the place where all of your relevant referral fee compliance data will live, on a matter by matter basis. Consequently, when you generate your referral fee agreement, you’ll be doing so within the confines of a particular referral fee matter. If that’s still not entirely clear, it will become more clear as you work through this tutorial.
Starting from your TrustReq dashboard, click on “Referral Fees” on the left hand sidebar. Then, find the relevant RFM in the table that appears. If the RFM doesn’t yet exist, then click on the green “Create Referral Fee Matter” button, and fill out the popup that appears.
Once you’ve created or located the relevant RFM, click on “Details” on the far right hand column.
On the following page, you’ll see a sidebar with your various referral fee compliance topics, such as the mandatory checklist, the standard referral fee agreement, and transaction logging.
For the purposes of this tutorial, click on “Referral Fee Agreement”.
Then, click on the button that says, “Generate a new agreement”.
At this point, TrustReq will ask you a few questions about the RFA, and this will likely take just a couple of minutes to complete.
First, enter the relevant client’s name. By default, TrustReq will assume that the relevant client is the person you indicated when you created the referral fee matter.
At step 2, confirm your firm’s role in the referral. Although you indicated this when you created the RFM, this question is asked anyway, just to be sure. For context, the LSO’s mandatory referral agreement uses the term “Referrer” for the licensee referring out the client, and “Referree” for the licensee receiving the client.
At step 3, you’ll be asked to identify the referring licensee. If your firm is referring out the client, then the search box will search your fellow team members; however, if your firm is receiving the client, then the search box will search your contact list.
At step 4, you’ll be asked to identify the licensee who is receiving the client from the referring licensee. Again, the search box will adapt to your role.
At step 5, you’ll be presented with a couple of partially complete sentences that you will be required to finish. TrusReq will use your responses to ensure that the mandatory language of the standard referral agreement is followed. The first sentence is about what the client is obtaining legal services for, and the second sentence explains why the referring lawyer recommended the receiving lawyer.
At step 6, you must disclose if there is a legal, financial or other relationship between the referring licensee and the receiving licensee. The details of the referral fee will be addressed in other questions, but this question relates to disclosure of any relationship beyond that fee. Making such disclosure is not optional.
At step 7, you will be asked if the referring licensee recommended any other licensees to the client, other than the receiving licensee. This is because the standard referral agreement obligates licensees to recommend at least two licensees to the client, or provide reasons as to why it has not been reasonably possible to do so. If you select “No” to the question at step 7, you’ll need to provide reasons before moving to the next step.
At the 8th step, which is the final step, you’ll simply indicate how the referral fee will be calculated. You have three options. You may select either a fixed dollar value, a percentage of fees, or another agreed upon basis. Regardless of which option you select, TrustReq will require you to provide some additional information.
A referral fee cannot exceed 15% of the fees paid to the licensee who received the referral for the first $50,000 of such fees for the matter, and 5% of any additional fees for the matter, up to a maximum referral fee of $25,000.
Starting with the “fixed dollar value” option, if you attempt to enter a number that exceeds the regulatory limit, you’ll see a warning appear, and the system will not permit you to proceed further.
If you select a “percentage of fees”, then it will be your responsibility to perform the necessary calculations to ensure that you do not exceed the regulatory limits.
If you select “on another agreed upon basis”, then you’ll be required to provide an explanation of how the referral fee is to be calculated. You’ll also see some additional help text appear with links to assist you in staying compliant.
When you’re finished with step 8, you can click “Preview” in the bottom right hand corner. The preview will open in a new tab, so you don’t lose your work. You’ll notice that the information you provided is indicated in purple, while all of the non-optional language in the standard agreement is indicated in black. Note that this is just a preview, and the final version of this document will reflect the layout and style of the Law Society of Ontario’s standardized Referral Fee Agreement.
If you notice that anything needs to be changed, then remember not to use your browser’s “Back” button, as this will result in the loss of your work. Instead, use the “back” button in the bottom left hand corner of the area where you were generating your RFA. When you’re happy with all of the content, simply click “Generate” at the end of step 8.
Now, you’ll be able to access your generated content in the Referral Fee Agreement section of the RFM page. Remember, you still need to collect the necessary signatures, so let’s talk about that.
Click “View” to reveal the completed agreement.
Then, click download PDF.
After you’ve downloaded your PDF, you can then use whichever e-signature software you typically use, such as DocuSign, Adobe Acrobat, or Clio. At this time, this step is done outside of the TrustReq platform. That being said, once you have a fully signed copy of the referral fee agreement, you can click the button that says “Upload a signed agreement”, and your document will be stored for record keeping and auditing purposes.
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