Should all professionals' fees as a percentage be banned?

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kkelliher

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In light of the way our economy burst are we any closer to the abolition of professional fees based on % of value?

Given the fact that there is no onus (ethics & personal intergrity aside) on a professional to keep down cost (or in respect to estate agents, sales price down) given the payment method, and given it has not served Ireland Inc well, I personally believe % fees should be banned by law but would welcome comments/views of others.
 
If you are not happy with paying a percentage fee to your architect or to your auctioneer, then you are perfectly free to negotiate some other arrangement with them and in fact, many customers do.
 
IMHO it all depends what professional.

I think an estate agent charging a % fee for selling a house based on the market value of the house and a soilicitor charging a % fee for conveying a house, again based on it's market value, is outdated and in many ways is simply arbitrary!

Whether the sale of a house is E250k or E2,500k, essentially the services provided by the estate agent in selling the house and a solicitor conveying the house are the same/pretty much defined (irrespective of the value of the house).

I think an architect charging a % fee is acceptable (obviously I am slightly boased) given that the higher the construction cost usually means the bigger job which usually means more work to be done by the architect in terms of desigining, specifiying, detailing, inspecting on site, longer time on site (i.e. more visits), snagging, certifying, etc., etc.

An architcet over specifying a job, simply to increase his fees, will soon be found out (I can guarantee you that), especially with sites like this! People are a lot more clued in these days even down to what's required in terms of insulation.

Once the scope and scale of a project has been agreed (i.e. after the design is complete) you will often find that many architects will fix their fees at that stage.
 
My original post was not directly aimed at architects but all professionals in the property industry.
 
Given the fact that there is no onus (ethics & personal intergrity aside) on a professional to keep down cost (or in respect to estate agents, sales price down)

Estate agents are employed by the vendor, who is obviously trying to get the highest price he can.

Solicitors' professional indemnity insurance premium is to an extent determined by the value of the property they are involved in buying as the exposure of the insurer is related to the purchase price so while the work may be the same there can be a difference in overheads for buying a (much) more expensive property.
 
No method of calculating a fee should be "banned by law", as to do so would suggest that a crime had been committed and this is not the case.

Percentage fees have arisen as a reasonable response to estimating the kind of costs that may arise for a project of a given size, cost and complexity.
They are not written in stone but represent a bargaining position whereby a professional may have a reasonable expectation of profit from work undertaken.
They are usually based on a sliding scale , with smaller complex jobs with personal service costing proportionally more than larger simpler jobs handled remotely.

A percentage rate is no less a fair contemplation of how the overall costs and profits on a job should be addressed than the hourly rate.
The hourly rate, while it may be applied on the basis of supposed competence and experience, is as much an estimate as the percentage rate.

The hourly rate is less of an assurance regarding either the cost of the running of a job or ensuring quality of service in a large company than a sole tradership.
This is because with a large practice, one is never certain that the person signing is actually carrying out the work or merely rubber stamping the work of others.

If your want to contemplate fixed cost, which effectively equates the cost of doing a professional job over time to single piecework, then you are inviting people to over-price because risk is inherent in any job.
While an hourly rate allows for additional cost based on time, and a percentage rate allows for additional cost based on the increased total cost of a larger enterprise, the fixed rate does not allow for either.
It requires a precise definition of the work to be done, which most lay clients are unsuited to carry out, and it requires them to undertake to be bound by such a definition, which most are reluctant to do.
It is a ball-park gross estimate.

One this is certain, the current vogue of playing hard-ball with professionals or not paying them at all is going to come back and bite the punter at some point.
This may be either through us seeing a brain drain of emigration reducing the competition or a reduction in service quality or a lowering of work standards.
German or British firms of which I am familiar would not have put up with the nonsense professionals here have had to accept here for the past decade.

We are expected to carry out feasibility work at no cost with the promise of being able to roll it up "if the scheme goes ahead".
This is for clients who expect not to pay your fees, but don't share the profits they make on foot of your work if it goes well.

At the other end we are expected to provide short- term [and sometimes not so short term] lending facilities for clients.
Look at the Traynor O'Toole and Murray O'Laoire collapses and the amount of client debtors they were carrying.
These bad practices are already stopping as no upturn is yet in sight and accumulated profits are running out.

Lots of changes are on the way and it remains to see if Phil Hogan is a force for good or ill in all of this.


[broken link removed]

All advice on AAM is remote from the situation and cannot be relied upon as a defence or support - in and of itself - should legal action be taken.
Competent legal and building professionals should be asked to advise in Real Life with rights to inspect and issue reports on the matters at hand.
 
An architcet over specifying a job, simply to increase his fees, will soon be found out (I can guarantee you that), especially with sites like this! People are a lot more clued in these days even down to what's required in terms of insulation.
Agreed, this is an urban myth that I have never seen substantiated.
Typically it is confused with the entirely appropriate fees charged because a client has changed his mind and/or require additional work involving more research, changes to finished drawings or previously unscheduled overtime hours to remedy site details is required.

Once the scope and scale of a project has been agreed (i.e. after the design is complete) you will often find that many architects will fix their fees at that stage.

This is normal practice but seldom gives the comfort you might expect.
In fact, during the negotiations the percentage fee estimate can be the bane of the architect by putting the bar too high for the client's mindset (as opposed to pocket).
He can find his legs taken out from under him by his client then denying him the necessary fee to provide, for example, sufficient limited inspections on site but still require him to certify.
Its a stupid architect who sees this as anything other than a case of negligence in the making, because certifying others mistakes comes back to haunt you.
We will sooner do the work for less and make proper visits and photographic records than certify in ignorance.


[broken link removed]

All advice on AAM is remote from the situation and cannot be relied upon as a defence or support - in and of itself - should legal action be taken.
Competent legal and building professionals should be asked to advise in Real Life with rights to inspect and issue reports on the matters at hand.
 
I've asked the moderators for clarification on this and on another point, where a thread containing a rebuttal to RIAD_BSC was apparently deleted.

I am starting to get narked at people posting comments about how fees are calculated as if percentages are written in stone when for the sole traders I know they are merely a starting point and are seldom if ever realized as the actual fee income.

You'll see solicitors retiring in the forties having made their millions, and you'll find a lot of barristers living in Wellington Road, Dublin 4 and Dalkey County Dublin in big houses (and good luck to them), but very few architects can do this even at retirement and its not because they are work shy, its because the fees/costs equation is relatively poor compared to some other professions.

I'm not complaining about fees in general - back when there was a market I made a reasonably good living - but it wasn't double the industrial wage or anything like it.
But when I hear people on AAM talking about gross fee income as if it was nett profit and not merely turnover out of which all other costs and expenses have to be taken, then I get annoyed.

Gross Fees are the fees charge to clients for providing a professional service.
Let me be explicit - a well- run sole tradership may see 30-40% of gross fees as income/profit.
A small office may see 20% profits, out of which they have to take R&D funding, training, CPD seminars or risk falling behind.
A larger firm may find this figure is 10-15%, between rental costs, additional insurance premiums and the falling rate of percentage fees on larger and more costly jobs.

But remember - gross sees - however they are calculated - are not profits!

ONQ

[broken link removed]

All advice on AAM is remote from the situation and cannot be relied upon as a defence or support - in and of itself - should legal action be taken.
Competent legal and building professionals should be asked to advise in Real Life with rights to inspect and issue reports on the matters at hand.
 
As a direct response to kkelliher, I would have to answer no, but I would be open to argument.

Fees are based on a percentage of the Nett Building Cost and have been developed to a very fine point to offer both value for money to a client and reasonable return to a professional.
Some people seem to be relating professional Fees back to the nett building cost as if its a profit charged on the build cost to the Employer/Client.

Thy are mistaken in thinking this - fees are charged to make a profit on the cost of providing a service.
There is only a loose, empirical relationship between the nett building cost and the fee amount.
The fee amount is proportionally bigger for less costly projects for a very simple reason.

The architect spends as much time on an extension as on a mid-range office building.
I know - I have done both many times over - in fact the office is easier to complete.

Extensions are far more personal things than office blocks and must be "just right".
Offices are commercial undertakings with less personal issues to resolve.

So even with higher percentage fees an architect makes less money on an extension for the same amount of time.
For the record, my most intensive project to date was a private house of circa 15,000 sq.ft.
It had the scale of a mid range commercial building but was more highly serviced.


ONQ.

[broken link removed]

All advice on AAM is remote from the situation and cannot be relied upon as a defence or support - in and of itself - should legal action be taken.
Competent legal and building professionals should be asked to advise in Real Life with rights to inspect and issue reports on the matters at hand.
 
Estate agents are employed by the vendor, who is obviously trying to get the best price he can.

is this not part of the reason we had a property bubble that was unsustainable. As in other countries if you put a property on the Market for a defined asking price it should be acceptable that if offered the asking price there should be an agreement. Otherwise go down the auction route. There is no rational behind % fees in this industry.

Is there any more work in selling a property for 300k as allowed to 500k?
 
is this not part of the reason we had a property bubble that was unsustainable. As in other countries if you put a property on the Market for a defined asking price it should be acceptable that if offered the asking price there should be an agreement. Otherwise go down the auction route.

That's stretching it a bit. If a purchaser is willing to pay €500K for a house then why shouldn't the vendor accept the €500K. I disagree with gazumping though.


There is no rational behind % fees in this industry.

Is there any more work in selling a property for 300k as allowed to 500k?

Well there probably is more work involved in getting a property sold for €500K than for selling the same property for, say, €450K.

And it's in the vendor's interest for the estate agent to get the best price for the property so the % acts as an incentive.

Otherwise why would an estate agent try to get the €500K if he has already earned his fee by agreeing a sale for €450K?
 
My thread title was altered by a Moderator and not myself

KK, your original title was the meaningless 'Fees on %' such meaningless titles are in breach of our posting guidelines and such a breach normally results in the thread being locked or even deleted. Occassionaly a moderator might expand the title if he is sufficiently interested in the subject matter.

If you are unhappy with the title as it stands then as OP you are always free to edit it.

aj
moderator
 
The current thread title is a little misleading.
There is nothing allied or indeed associated between architects and say estate agents or solicitors.
We may work for the same client, but we interrelate only peripherally with others, many of whom are the greatest heatscalds you will ever meet.

==========================

Project Managers / Client Representatives.

I've worked with one office that cost the client over €200,000 in professional fees for abortive work that was not needed, and I've endured another who was supposed to organize the health and safety and legals on a job and did neither. But its swings and roundabouts. The former one came back on another job and pointed out the need for a specialist insurance that if not purchased could have left the job high and dry. A mixed bunch. They claim to reduce the fees of others and overall costs to justify their own fee. It may happen on some projects, but I've yet to see it personally.

==========================

Solicitors

With solicitors, architects are usually under pressure to offer certificates from an early stage in the proceedings - one of the most important skills a young architect can acquire is saying "No, and here's why..." to a pushy solicitor, whose wheedling insistence could expose an unwary professional to the risk of pre-certifying or over-certifying and set a most unwelcome precedent for a young office in future years.

Less usually with solicitors architects work supplying Reports and Opinions to a legal team run by a solicitor preparing a case. Again, the most important word to learn is "NO!" Solicitors will happily try to get others to do their work for them, such as researching lease with maps on them, merely because they have maps on them, when they are the ones getting paid by the hour to trawl through deeds and conveyances, not anyone else. Its the architects job to catch any final proof reading errors prior to swearing the Declaration of Identity and to ensure the work "compare" is used and not "inspect" which has another legal meaning.

==========================

Estate Agents

With estate agents, these are people who put together deals and in many cases lead the discussions on commercial developments during the early stages. Just remember, their furnished information literally is not worth the paper its written on - it usually says so in the disclaimer on the back in microscopically small print. They tend to spend a lot of time pressuring architects to engage in planning studies to say what they want them to say about the likelihood of achieving the latest multi-million Euro development.

We can all remember that tower in Ballsbridge on the Jurys site that got refused, the outrageous price paid by McNamaras consortium for the land bank that put them on an unsustainable position and the tower in Lucan/Clondalkin that got permission only to be overturned by An Bórd Pleanála. So much for the dangers of talking things up.

Plus their fees are charged on the sale price, not the net building price, so there is no incentive for them to cry "hold" to a price rocketing into the stratosphere.

==========================

Architects work in a collegiate manner with some professionals. We usually lead the design team where we try to co-ordinate all our efforts to best effect. A list of such professionals might include:

In-house - salary or hourly rate:


  • 3D presenters/Graphic Artists
  • Architectural Technicians
  • CAD Technicians
  • Draftspersons

Design Team Professional offices - professional fees:


  • Chartered Surveyor (land and property)
  • Landscape Architect (biodiversity, amenity screening, noise control)
  • Quantity Surveyor (cost estimate, bill of quantities and contractual advice)
  • Structural and Civil Consulting Engineer (structure and drainage)
  • Mechanical and Electrical Consulting Engineer (services and energy usage)
  • Interior Designer (environmental design of interior)
Other Professional offices - professional fees:
  • Lighting Consultant
  • Arborists/Tree Surgeon
  • Garden designer
  • Fire Safety Consultant
  • Health and Safety Consultant
  • Disability Access Certificate Consultant
  • Photographer
  • Graphic Artist
  • 3D Modeler/Visualiser/Presenter
  • Sports/Wellness Consultant
  • Security Consultant
  • IT Consultant

The team will engage with other Nominated Sub-Contractors and Specialist Firms - agreed price.


  • Piling and Groundworks
  • Vibro-compaction
  • Land Drainage
  • Shoring and Scaffolding
  • Timber Frame Specialist
  • Heating Contractor
  • Electrical Contractor
  • Plumbing Contractor
  • Concrete Formwork
  • Concrete Specialist
  • Roofing structure
  • Cladding
  • Glazing
  • Windows
  • Doors
  • Re-constituted Stone
  • MVHR systems
  • Air Conditions Systems
  • Under Floor Heating Systems
  • Radiator Specialists
  • Swimming Pool suppliers
  • Sauna suppliers
  • Vacuum systems
  • Lift Manufacturer
  • Lighting
  • Sanitaryware
  • Kitchen Suppliers

I won't go into the large population of interior firms and suppliers including furniture, salvaged antiques and fitments, tiling, artwork, suspended ceiling, raised access floors, etc.
I similarly won't include the well-known list of tradesmen that are normally domestic to the main contractor or those artisans or craftsmen involved in the built work like Stonemasons.

==========================

The above lists are not exhaustive and seek to outline the ranges of people we work with, of them only the professionals charge fees.

I recently did work on my holidays for a client - it had to be done, but would any salaried or P.A.Y.E. worker do that? Not in my very wide experience.

Service like that is one of the reasons why you pay professionals reasonable fees.
We undertake to get the job done, whatever it takes.

I hope this helps those outside the profession to understand the nature of professionals fees, and in particular the use of percentage fees as a tool for calculating the agreed fee figure. They are not set in stone and are seldom achieved.


ONQ

[broken link removed]

All advice on AAM is remote from the situation and cannot be relied upon as a defence or support - in and of itself - should legal action be taken.
Competent legal and building professionals should be asked to advise in Real Life with rights to inspect and issue reports on the matters at hand.
 
KK, your original title was the meaningless 'Fees on %' such meaningless titles are in breach of our posting guidelines and such a breach normally results in the thread being locked or even deleted. Occassionaly a moderator might expand the title if he is sufficiently interested in the subject matter.

If you are unhappy with the title as it stands then as OP you are always free to edit it.

aj
moderator

Thanks Ajay for clarifying that point
Separate thanks also for not locking the thread and allowing the discussion.
Its true to say that other debates on AAM have centred on architects percentage fees.
Previously, such debates have been started by laypeople who don't understand the nature of the building industry.
Hopefully this thread will broaden the debate to invite professionals to have their say.

ONQ
 
These days, it isn't the professionals who set the prices. It is consumers, by dint of what they are prepared to pay. The professionals can discuss prices and fee structures all they like on AAM. But when the market funamentally shifts like it has done, they are just passengers like the rest of us. Until the available supply of services moves closer to demand, consumers have all the power and they will set the prices. Professionals will have to adjust their cost bases accordingly to match this. Complaining about it is like complaining about the weather. It is of no consequence. Move with the market, or go bust because you're over-priced and you can't get enough business.

Banning percentage fees via legislation would be barmy. If you don't want to pay a percentage, drop the professional and hire someone who'll do the work for a fixed price. You don't need a new law for that.
 
Go into Edit/Advanced and look for the thread title box ---> edit it. Save.

As the thread starter you should be able to do this.

ONQ

[broken link removed]

All advice on AAM is remote from the situation and cannot be relied upon as a defence or support - in and of itself - should legal action be taken.
Competent legal and building professionals should be asked to advise in Real Life with rights to inspect and issue reports on the matters at hand.
 
Working for below cost is not a good policy.
You get what you pay for and only a fool expects to by a Rolls Royce for a Mini One price.

Supply price is not determined arbitrarily, but involves standards and quality as well as the means of production and competence.
Acquiring qualifications and competence requires years of training and these years and ongoing CPD have to be paid for out of charging reasonable fees.

Some people never learn and advocate this approach; -

"If you don't want to pay a percentage, drop the professional and hire someone who'll do the work for a fixed price. You don't need a new law for that."
As I have already posted that professionals use the percentage fee as a starting point, it seems that "drop the professional" seems to be what this poster is all about.

Let those who are unwary and unwise follow RIAD_BSC's advice and carry on down the road to a building and/or design disaster.
I'll still be here to help you with the extensive remedial works and legal action that results.

For a reasonable fee.


ONQ

[broken link removed]

All advice on AAM is remote from the situation and cannot be relied upon as a defence or support - in and of itself - should legal action be taken.
Competent legal and building professionals should be asked to advise in Real Life with rights to inspect and issue reports on the matters at hand.
 
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