Client-facing outputs and risk - Client-care letter: scope, ...

Learning Outcomes

This article explains the core requirements for effective client-care letters, including:

• Identifying the mandatory contents of a client-care letter and explaining their purpose, covering scope of instructions, conduct and supervision, costs, risk, complaints, and next steps.
• Drafting clear, client-friendly scope statements that define what the firm will and will not do, manage expectations, and reduce future dispute risk.
• Explaining costs accurately and transparently, including basis of charging, estimates, VAT, disbursements, payment terms, and updates as matters progress.
• Communicating key financial and procedural risks (including adverse costs exposure, complexity, delays, and limitation) and linking them to the client’s objectives and options.
• Setting out next steps with responsibilities, timings, and dependencies, and identifying any further information or investigation needed before substantive work commences.
• Reflecting current regulatory duties in client-care communications, including pricing information, complaints and Legal Ombudsman time limits, costs challenges, and data/confidentiality requirements.
• Using a clear drafting style (active voice, plain English, structured headings/numbering) and incorporating practical steps such as identity checks, source-of-funds, and conflicts checks.

SQE2 Syllabus

For SQE2, you are required to demonstrate competence in drafting and advising on client-care letters, including scope, costs communication, risk, complaints, and next steps, with a focus on the following syllabus points:

• Identifying the mandatory elements in a client-care letter and their rationale.
• Explaining the scope of instructions and exclusions to manage risk and expectations.
• Providing costs information: charging basis, estimates, VAT, disbursements, payment terms, and updates as the matter progresses.
• Addressing risk of adverse costs and explaining funding options (private funding, insurance, legal aid, CFAs/DBAs) and their implications.
• Outlining next steps, deadlines, and responsibilities for solicitor and client.
• Complying with regulatory requirements: complaints, Legal Ombudsman time limits, SRA regulation details, and costs challenge rights.
• Maintaining accessible, concise, client-focused drafting, with clear structure and signposting.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What are the minimum required elements that must appear in a client-care letter provided to a new client?
2. How should a solicitor communicate the risk of adverse costs in client-care correspondence?
3. List three types of information that must be given to a client regarding costs.
4. True or false: A client-care letter must always specify the person responsible for handling the case and for overall supervision.

Introduction

When you act for a client, you are required to give clear written information at the outset, typically in a client-care letter. This document protects both the client and the firm. For SQE2, you must show you understand both the regulatory requirements and professional best practice for the content, structure, and communication style of such letters.

Delivering an effective client-care letter is not merely about compliance; failures can expose clients to confusion, risk, or complaint. Clear, accessible drafting avoids liability, sets expectations, and underpins the legal relationship. It should tell the client what you will do, how it will be priced, what the risks are, how to complain if needed, and what will happen next.

Key Term: client-care letter
A written communication from solicitor to client, provided at the outset of an instruction, that sets out what the solicitor will do, how much it will cost, client rights, and other tenure information.

The Purpose and Scope of the Client-Care Letter

Almost every instruction requires solicitors to provide a formal written client-care letter. It must specify:

• the scope of instructions (what the firm is being asked to do, and any excluded tasks),
• the person with conduct of the matter and overall supervision,
• costs information,
• risks (including cost risk),
• complaints procedure, and
• next steps (including client responsibilities).

Clarity on scope is essential. State the services you will supply and explicitly identify any areas not covered (e.g., tax planning, financial advice, valuation, or specialist regulatory matters). Where work is staged (e.g., initial advice before issuing proceedings), define each phase. If the client might need referrals (e.g., to counsel, experts, tax advisers), indicate that and explain who will instruct and pay them.

Confirm any dependencies that affect scope: documents you need, third-party actions, or client decisions. If deadlines or limitation periods may impact the retainer, flag them and explain whether your scope includes or excludes responsibility for monitoring them.

Name the fee earner with day-to-day conduct and the supervisor, including contact details. This is both good practice and expected by regulators. Explain how your team will communicate and how often, and set expectations on response times, updates, and availability.

Key Term: scope of instructions
The precise activities, advice, and tasks the solicitor agrees to carry out for the client, as stated in the client-care letter. Clearly setting out what is included or excluded helps avoid later misunderstanding.

Key Term: retainer
The contractual basis on which a solicitor is engaged to act, including scope, terms of business, payment arrangements, and rights/responsibilities of both parties.

Worked Example 1.1

A client, Mrs Green, instructs you to deal only with the transfer of a property. She will handle negotiations about contents herself. What should you say about the scope of your retainer in your client-care letter?

Answer:
Your client-care letter should explicitly state that you are instructed solely for the legal transfer of the property and will not conduct or advise on negotiations regarding fixtures or fittings.

To manage risk, add an exclusion for tax advice (e.g., SDLT reliefs), valuation matters, and mortgage advice unless explicitly included, and state that if Mrs Green later wants help with contents negotiations, she must instruct you to extend the scope and you will provide revised costs information.

Explaining Costs and Risk in the Client-Care Letter

Regulatory requirements are strict. The SRA Code of Conduct for Solicitors requires clients receive the best possible information about how their matter will be priced both at the time of engagement and, when appropriate, as the matter progresses. Clients must be told the likely overall cost where possible, and you must update them in writing if the estimate changes.

This means you must give:

• the basis of charges (hourly rate, fixed fee, capped fee, or contingency),
• an initial costs estimate,
• information about third-party expenses (disbursements or taxes, such as SDLT or Land Registry fees),
• risks relating to costs (including, if relevant, risk of paying another party’s costs),
• VAT treatment and rate,
• payment terms (billing frequency, payment on account, interest on late payment, consequences of non-payment),
• whether rates may change during the matter and that you will notify the client, and
• any likely costs for counsel/expert fees and when you will seek authority before incurring them.

Explain if you will require money on account and how it will be held. If you anticipate disbursements (court fees, experts, searches, barrister’s fees), indicate approximate amounts and when the client will be asked to pay them. Where a fixed fee is quoted, specify what is included and excluded, and what triggers additional fees.

Set out funding options and implications:

• Private funding: the client pays your fees and disbursements; success fees are not applicable.
• Insurance: check for existing “before-the-event” (BTE) cover; if not, consider “after-the-event” (ATE) insurance in contentious matters and explain premium costs and recoverability constraints.
• Legal aid: explain eligibility in applicable areas and contribution implications.
• Conditional Fee Agreements (CFAs) and Damages-Based Agreements (DBAs): outline suitability, success fees/damages deductions, and regulatory limits. Clarify that success fees and most ATE premiums are usually not recoverable from the opponent.

Key Term: costs estimate
Your current, best assessment of the total costs and disbursements likely to be incurred by the client, based on the information currently available.

Key Term: funding arrangement
The agreed method by which the retainer will be paid: commonly private payment, legal aid, or other third-party funding. The arrangement must be explained in writing.

Key Term: disbursement
Expenses paid to a third party on the client's behalf (e.g., court fees or expert fees), recoverable in addition to professional fees.

Key Term: adverse costs
The risk that a party in litigation may be ordered to pay part or all of the opponent’s legal costs, subject to track, offers, conduct, and the court’s discretion.

Key Term: Part 36 offer
A formal settlement offer under the Civil Procedure Rules. If a party fails to do better than a Part 36 offer at trial, specified costs consequences may apply, including enhanced interest and costs orders.

Explain practical cost risks. In small claims, costs recovery against the other side is limited; clients should expect to bear most of their own costs even if successful. In fast track and multi-track claims, the court’s costs discretion applies, and Part 36 carries significant consequences. In transactional work, scope changes or third-party delays can increase costs; warn clients about factors that may cause estimates to rise.

Worked Example 1.2

You give a client an initial estimate of £4,000 plus VAT and disbursements. During the matter, things become more complicated. What must you do regarding costs information?

Answer:
You must update your client-care letter and notify the client in writing if the estimate changes, providing updated costs and an explanation for the revision.

Consider offering practical assurances: regular costs updates, a costs cap that requires client approval before exceeding it, and confirmation that no significant disbursements will be incurred without consent. Make clear the frequency of billing (e.g., monthly) and that interest may be charged on late payments per your terms.

Worked Example 1.3

You act in a fast track claim. The defendant makes a compliant Part 36 offer. How do you explain cost risk to your client?

Answer:
Explain that if the client rejects the Part 36 offer and then fails to obtain a judgment more advantageous than the offer, the court may order the client to pay the defendant’s costs from the expiry of the relevant period and interest on those costs. Accepting a reasonable offer can reduce adverse costs exposure.

Exam Warning

If a client-care letter fails to explain adverse cost risk (such as the chance the client may pay another party’s costs) or omits costs estimates, this is reportable as a breach and can undermine any attempt to recover fees later.

Regulatory and Complaint Information

Compliance with SRA requirements means you must provide the following:

• Details of how the firm is regulated and by whom (e.g., regulated by the Solicitors Regulation Authority, with SRA ID where appropriate),
• Instructions on how to complain to the firm, including who to contact and the internal complaint process,
• Information on the Legal Ombudsman, including time limits to complain to the Ombudsman (generally within six months of the firm’s final response and within one year of the act/omission or the date of awareness),
• Confirmation that the client can challenge costs and seek an assessment under the Solicitors Act 1974,
• A brief explanation of the difference between service complaints (Legal Ombudsman) and conduct concerns (SRA),
• A reference to the firm’s privacy notice and data protection obligations (UK GDPR/Data Protection Act 2018),
• Information about handling of client money and interest policy if holding funds on account,
• Any applicable consumer cancellation rights if instructions are concluded at a distance or off-premises (e.g., 14-day cooling-off period), including the client’s right to request immediate work and the costs implications of cancellation after work starts.

Omitting this information is a common error seen in the SQE2 exam and can lead to a complaint or professional discipline. In particular, be precise about Legal Ombudsman time limits and make your internal complaints contact clear. If you use third-party ADR, state whether you agree to use it; otherwise say you do not.

The Importance of Next Steps

At the end of every client-care letter, outline the next steps—this clarifies who must do what, and by when.

Include:

• Steps the firm will now undertake (e.g., request for ID documents, conflict checks, draft contracts, write to the other side),
• Actions required from the client (e.g., provide specific information or documents; confirm instructions; pay money on account; identify funding),
• Timings for next update or contact,
• Any deadlines or key dates (e.g., limitation period, submission deadlines, court timetables),
• Dependencies and conditions (e.g., work commencing only after receipt of ID/source-of-funds and payment on account).

Align next steps with your analysis of options and any factual gaps. Where further investigation is needed before a firm opinion can be given, state this and list what must be obtained (e.g., expert report, title documents, witness statements).

Worked Example 1.4

Instructed by a new client on a business purchase, you require further documentation before you can proceed. How do you reflect this in your client-care letter?

Answer:
State clearly the client must supply the particular documents (e.g., company accounts) before the firm can commence substantive work, and give any relevant deadlines.

Worked Example 1.5

You cannot advise fully on a proposed employment claim until you see the contract and disciplinary correspondence. How do you set next steps?

Answer:
Explain that you will review the employment contract and correspondence once provided, then confirm whether the claim is viable and the best forum. Ask for those documents within a set timeframe and state you will give an updated costs estimate after review.

Communicating Risk to the Client

A good client-care letter sets out the risks to the client—especially financial and procedural risks. This could include the possibility of:

• Incurring additional costs if matters become more complex,
• Adverse costs orders in contentious matters,
• Delays if the client or third parties fail to act,
• Limitation risks,
• Evidence gaps or credibility issues affecting prospects,
• Settlement risk (e.g., rejecting reasonable offers),
• Third-party dependencies (e.g., lender, court timetables, Land Registry),
• Regulatory or compliance risks (e.g., AML checks; inability to proceed until identity/source-of-funds are verified).

Make risks specific and link them to options. For “fix-it” problems (litigation/negotiation), include a realistic prediction of how a court might handle key legal issues. For “do-it” problems (transactions), consider credible positions an opponent or third-party could take that might block or complicate completion, and advise on steps to limit or prevent conflict.

Revision Tip

In your exam answer, always include simple, client-friendly wording about cost and risk, and confirm how the client can seek clarification.

Worked Example 1.6

Your client wishes to pursue a negligence claim with a limitation period approaching in four weeks. How do you convey risk?

Answer:
Warn that if proceedings are not issued before the limitation date, the claim may be time-barred. Set out the steps and information needed urgently to protect the claim, note increased costs and urgency, and ask for immediate instructions and funds on account.

Drafting Style for Client-Care Letters

Keep the letter concise, free from jargon, and readable by a non-lawyer. Use short sentences and avoid technical terms without explanation. If standard terms of business or further information are provided separately, refer to this clearly in the letter.

Structure helps clients locate information. Use informative headings and, in longer letters, numbered paragraphs to separate topics (scope, conduct/supervision, costs, risks, complaints, next steps). Numbered lists are useful where you request detailed information, making responses easy to track.

Plan before you draft so you cover all mandatory elements and avoid repetition. A simple outline with headings will help maintain logical order and ensure that you do not omit key information such as funding or complaints.

Use the active voice for clarity (“We will issue proceedings by 20 December” rather than “Proceedings will be issued”). Open by explaining your involvement and confirming instructions; end with a clear, courteous close and confirm how and when you will next be in touch. Be consistent in how you sign (by the firm or by the individual fee earner, consistent with your opening).

Avoid labels like “without prejudice” in client-care letters; they are for settlement communications and have specific legal effects. In client-care communications, focus on clarity and compliance rather than litigation privilege mechanics.

Key Term: client-care letter
A written communication from solicitor to client, provided at the outset of an instruction, that sets out what the solicitor will do, how much it will cost, client rights, and other tenure information.

Key Term: scope of instructions
The precise activities, advice, and tasks the solicitor agrees to carry out for the client, as stated in the client-care letter. Clearly setting out what is included or excluded helps avoid later misunderstanding.

Key Term: costs estimate
Your current, best assessment of the total costs and disbursements likely to be incurred by the client, based on the information currently available.

Key Term: funding arrangement
The agreed method by which the retainer will be paid: commonly private payment, legal aid, or other third-party funding. The arrangement must be explained in writing.

Key Term: disbursement
Expenses paid to a third party on the client's behalf (e.g., court fees or expert fees), recoverable in addition to professional fees.

Key Term: retainer
The contractual basis on which a solicitor is engaged to act, including scope, terms of business, payment arrangements, and rights/responsibilities of both parties.

Key Term: adverse costs
The risk that a party in litigation may be ordered to pay part or all of the opponent’s legal costs, subject to track, offers, conduct, and the court’s discretion.

Key Term: Part 36 offer
A formal settlement offer under the Civil Procedure Rules. If a party fails to do better than a Part 36 offer at trial, specified costs consequences may apply, including enhanced interest and costs orders.

Summary

Key Point Checklist

This article has covered the following key knowledge points:

• The mandatory contents and professional function of the client-care letter.
• The need to specify and limit scope of instructions to avoid future dispute.
• Naming the person with conduct and the supervisor, with contact details.
• Regulatory requirements for costs information and ongoing updates, including basis of charging, VAT, disbursements, and payment terms.
• Funding options and adverse costs risk, including small claims limits and Part 36 consequences.
• Complaints information, Legal Ombudsman time limits, and costs challenge rights.
• Data protection, client money handling, and consumer cancellation rights where applicable.
• Direct and clear explanation of next steps to ensure effective client output.
• Importance of accessible language, active voice, and structured, numbered paragraphs for client understanding.

Key Terms and Concepts

• client-care letter
• scope of instructions
• costs estimate
• funding arrangement
• disbursement
• retainer
• adverse costs
• Part 36 offer