How Law Firms Should Word a Referral Fee Arrangement With Another Firm

17 September 2026·3 min read

Quick answer: If your firm pays or receives a referral fee for a matter, disclose it plainly to the client in writing, in one short paragraph, before they engage — name that a fee exists, roughly what triggered the referral, and that it doesn't change what they pay. Vague or missing disclosure is what turns a normal business arrangement into a trust problem. 🤍

Here's the honest version 💖: referral arrangements between firms are completely normal — a family lawyer sends a property matter to a conveyancer, a commercial firm refers out family law work it doesn't handle. What trips firms up isn't the arrangement itself, it's how (or whether) it gets explained to the client, and inconsistent disclosure is a bigger risk to the relationship than the referral fee itself.

What Most Law Firms Get Wrong

The common failure is treating disclosure as a compliance checkbox rather than a client communication moment. A referral fee mentioned only in fine print, or not at all, can look like something was hidden — even when the arrangement was entirely proper and permitted. Clear, upfront wording removes that risk and, done well, actually reinforces that the firm chose the referral partner carefully rather than by convenience.

The Disclosure Template

"As part of referring you to [Firm/Practitioner], we want to let you know that we [receive/pay] a referral fee for this introduction, in line with [state] professional conduct rules. This doesn't affect the fees you're quoted by [Firm/Practitioner] — we've referred you to them because [one genuine reason: specialisation, track record, availability]."

Send this before the introduction is made, not after, so the client has the information while they're still deciding whether to proceed.

A family law firm: includes the disclosure line as a standard paragraph in every referral email to a conveyancer, so it's consistent regardless of which staff member sends it — removing the risk of an inconsistent, ad hoc explanation.

A commercial law firm: pairs the disclosure with a one-line reason for the specific referral ("they handle more matters like yours than we do"), which reads as genuine guidance rather than a transaction.

The Mechanics: Getting the Arrangement Itself Right

Put the referral fee arrangement in writing between the two firms, separate from the client-facing disclosure — a short letter or email confirming the trigger, the fee, and how it's calculated. Keep the client-facing version short; the detail belongs in the firm-to-firm agreement, not the client email.

💡 Consistency beats charm: a templated disclosure line sent every time beats a beautifully worded one that only gets included when someone remembers. Build it into the referral email template itself.

Mistakes to Avoid

Disclosing the fee only if the client happens to ask
Burying the disclosure in a lengthy engagement letter rather than the referral email itself
Referring clients based on the fee rather than genuine fit for the matter
Leaving the arrangement undocumented between the two firms

Please note: general information, not legal advice — referral fee rules differ by state and law society, so confirm current requirements before adopting any wording here.

Frequently asked questions

Are referral fees between law firms allowed everywhere in Australia?

Rules vary by state and are set by each jurisdiction's law society or regulator — always confirm current requirements rather than assuming they match another state.

Does disclosure need to be in the formal engagement letter?

A separate, plain-language disclosure at the point of referral is clearer for the client than a clause buried in a longer document, though your engagement letter may also need to reference it depending on your obligations.

What if the client seems uncomfortable with the fee once disclosed?

Let them choose an alternative practitioner if they'd prefer — offering that choice openly is what makes the original disclosure credible.

Should the referral fee ever be disclosed as a specific dollar amount?

Some jurisdictions require this, others don't — check your specific obligations rather than defaulting to a general percentage description.

Keep reading 🤍

Written by

Kate, founder of Chronically Online

I help Gold Coast and Brisbane businesses grow with branding, websites and marketing that actually works.

Work with me ✦