Are contingency fees unfair, excessive and unlawful?
Title Research believes every entitled person should receive all they are entitled to. That’s why we think it’s unfair for other heir locators to sign-up beneficiaries to “contingency fee agreements” that often result in the beneficiary signing away 10% - 30% of their inheritance to the heir locator for being found.
Increasingly we guarantee results for a fixed fee. This means we guarantee to find beneficiaries for a fixed fee and if no beneficiaries are found then no fee is payable, regardless of the amount of time spent on research.
Significant concerns are now being expressed by the legal profession about “contingency fee agreements”. In legal opinions recently released by two leading barristers on probate law, Constance McDonnell and Peter John, a number of concerns have been raised about the lawfulness of contingency fees.
Our belief that contingency fees are unfair and potentially unlawful has led us to conclude that the time has come for better regulation to protect consumers from needlessly signing away a large proportion of their inheritance in excessive fees.
Probate Genealogy fees
So what are the main differences in charging between probate genealogists?
Contingency fees
The first type of fee is the “contingency fee” where heir locators, sometimes known as heir hunters, charge nothing up-front and do not charge anything unless they find the missing heirs.
If they do find the missing heirs, they charge a proportion of the inheritance due to that heir, typically between 10%-30%. The percentage fee is agreed with each beneficiary or the executor/administrator to the estate.
Whereas probate genealogists state contingency fees are appropriate because of the risk of not finding beneficiaries, there is a contradiction here, in that most genealogists claim a success rate of nearly 100%.
Contingency fees expressed as a percentage are not based on the time spent locating beneficiaries. So for example, on a £80,000 estate, a time based fee for a case might typically be £1000-5000. However, using a percentage fee, the charge for the same work might range from £8000 – £24,000. The percentage fee received becomes more disproportionate the greater the value of the estate, so on an estate worth £1m, the percentage fee received might be between £100,000 and £300,000 whereas a time based fee would stay the same (£1000-5000) for the same estate as the fee is based on time spent.
Consequently, percentage fees can be seen as unfair, excessive and disproportionate to the amount of work involved in locating heirs.
With the exception of Title Research, almost all of the other major probate genealogists also research unclaimed estates advertised by the Government. The Treasury Solicitor advertises details of unclaimed intestate estates, namely where the deceased has died without leaving a will. ‘Heir hunters’ compete to be the first to reach heirs to these estates and sign them up in exchange for a percentage of their inheritance. This practice of advertising estates has fuelled the use of contingency fees.
Fixed fees and guaranteed results
The second method of charging, preferred and used by Title Research, is where a fixed fee is charged on a results guaranteed basis, whereby there is a guarantee to find beneficiaries and if no beneficiaries are found then no fee is payable, regardless of the amount of time spent on research.
Probate genealogists may also charge a fee based on a fair reflection of the amount of time and skills needed to locate beneficiaries. Such fees are agreed in advance with the probate practitioner handling the estate.
Fixed fees and time based fees are proportionate to the work that needs to be undertaken, rather than to the value of the estate, as the research itself remains the same regardless of whether the estate is large or small. What this means is that fixed fees and time based fees will invariably be fairer for the estate.
Fees agreed in this way between the practitioner and the genealogist ensure costs are more closely controlled, it avoids the risk of beneficiaries unfairly signing away a large percentage of their inheritance unnecessarily, and preserves the maximum amount of inheritance for all the beneficiaries involved.
Unlike contingency fees, the cost of locating missing beneficiaries is shared equally amongst all beneficiaries. Put another way, once these fees have been paid by the estate as a whole (as with all other professional probate fees), all the beneficiaries receive 100% of their entitlement.
The case for regulation
Title Research would like to see Government regulation to protect consumers from unfair, and potentially unlawful, contingency fee agreements. Beneficiaries should have an independent body to which they can take complaints if they feel they have been over charged or treated unfairly by heir locators.
We hope the Law Society, the Society of Trust & Estate Practitioners and the Institute of Legal Executives will want to be part of the solution to this problem, by providing a best practice framework for probate practitioners that allows beneficiaries to be charged fairly. We want to engage with these organisations to hear their view on how best to achieve this solution.
Lastly, we would like to see Government reform of the way in which the Treasury Solicitor deals with and advertises unclaimed estates, which has fuelled the use of contingency fees.
Title Research will be engaging with stakeholders to seek views on the best way of regulating the system.