- Autumn 2023
- Buying in to Chambers for the first time – what do I need to know?
Buying in to Chambers for the first time – what do I need to know?
How accommodation for barristers in Barristers Chambers is organised varies across different jurisdictions. At the Sydney Bar, to obtain permanent or long-term accommodation from which they can practise, most barristers must secure membership in a Barristers Chambers. Membership is typically attained by ‘buying a room.’ That is, a barrister obtains membership of a Barristers Chambers by purchasing shares in the corporate entity underlying the chambers. The shares are usually purchased from a barrister who is leaving chambers. These shares include, among other things, a right to occupy a room in the chambers but also obligations to the chambers such as obligations to pay rent or licence fees. Chambers also typically charge members ‘floor fees’ also known as ‘clerk fees’. This is a monthly charge to each member of the chambers, usually on an equal basis, that funds the day to day operations of the chambers (such as staff wages).
What types of chambers models are on offer at the Sydney Bar?
Barristers Chambers at the Sydney Bar have diverged into three principal models. They can be broadly described as follows:
a. The Selborne & Wentworth model, where there can be significant capital requirements to buy shares, but with no obligation to pay monthly rent (although there can be other fees associated with ownership);
b. A chambers that operates from commercially leased premises where there is a capital requirement to buy shares (sometimes referred to as ‘key money’), which is lesser than the usual capital requirements in the Selborne and Wentworth model, but there is an obligation to pay monthly rent; and
c. A chambers that operates from commercially leased premises where there is no capital requirement to buy shares but there is an obligation to pay rent. The authors acknowledge the more recent emergence of virtual chambers at the Sydney Bar, but are not in a position to include analysis of that model.
How can I finance my purchase of chambers?
In summary, particularly where there is a large capital requirement for buying shares, investigate this early in your career by seeking financial advice about the most appropriate financing and purchasing structure for your circumstances. If you do not know what the likely capital or monthly costs are, do not be afraid to ask. Finding a banker or broker with experience in commercial lending to barristers will greatly assist. ‘Buying a room’ is not an easy transaction for an unfamiliar lender to understand. If you own your own home, it may be possible to take out a further loan mortgaged against your home to finance part or all of the purchase. (If you plan to access funds via an existing home loan you should get advice as to whether you can claim the additional interest as a tax deduction). If you do not own your own home, you may have to obtain a commercial loan. This may attract a higher interest rate or a higher deposit requirement, which is why it is important to talk to banks and brokers to find an appropriate deal. Lengthy interest only periods are commonplace. Having a good advisor may also assist in the loan application phase, particularly if you are still building up your practice or if your income has been affected by parental or other leave.
I am considering buying chambers, what are the key considerations?
There are key considerations relevant to any purchasing decision that are universal to all models at the Sydney Bar. What rights and obligations are granted by the Shareholders Agreement? Once you buy shares in a Barristers Chambers you are bound by the terms of its Shareholders Agreement. It is important to understand what the terms of your membership are so that there are no unexpected surprises later, in particular potential future financial obligations.
What rights and obligations are granted by the Shareholders Agreement?
Once you buy shares in a Barristers Chambers you are bound by the terms of its Shareholders Agreement. It is important to understand what the terms of your membership are so that there are no unexpected surprises later, in particular potential future financial obligations.
How much work can I legitimately expect from the Floor?
If this is an important consideration, it can best be discerned from talking to people at your seniority level who are at the chambers already. If the silks are busy (and are typically working with the juniors at their chambers), then that is a positive sign that the chambers supports its juniors. If the juniors are busy, there may be overflow work available.
What room is on offer?
Typically in any Chambers, the rooms are a range of sizes and barristers will upgrade into larger rooms as they become available. If this occurs in an orderly fashion, then, usually, the smallest room is available to purchase. If a room other than the smallest one is available for purchase, this may mean existing members in smaller rooms have declined to buy it. This does not mean you should not buy the room, but you should bear in mind it may be a difficult room to sell later, or that you may not be able to recover the full purchase price when you sell.
How are the floor fees/ clerk fees structured?
Do not be afraid to ask about how the finances of the chambers are administered in order to have comfort that monthly costs are predictable and stable.
Does the chambers have any capital intensive plans in the future?
Is the chambers planning any refurbishment works, renovations, or otherwise in the future? If yes, does the chambers have funds in reserve to do the works, will there be calls on capital or will the chambers be borrowing money to fund it?
What policies are in place for parental and personal leave?
You should know what policies the chambers has in place to assist you if you intend to take parental leave (or are required to take other leave), so that you know what (if any) financial plans you need to have in place in case you are required to continue to meet the costs of owning chambers while you are not working. Moreover, if you are returning from leave or wanting to work part-time, what is the policy on room sharing?
How is the Floor administered?
Being a member of a chambers may also mean entering into a particular workplace or administrative culture. If the nature of this culture is an important consideration for you, then you should make whatever enquiries you can to understand how the chambers is governed (whether by a Board or other structure) and if this meets your expectations.
Any other commitments?
It is also worth checking what other commitments may be involved. For example, if the chambers is planning a renovation and needs to borrow money, a lender might require personal guarantees from the shareholders to secure a loan and the chambers may increase floor fees to meet the future loan repayments.
How do you feel about the group of members you will be joining?
Try to get a sense from other barristers you know and trust, and from floor websites, of whether the chambers contains at least some barristers that you see as like-minded and collegiate, and even as role models. Having a supportive floor with people you like and trust is invaluable.
What are the specific considerations for buying into the Selborne or Wentworth models?
The primary consideration is the cost of buying shares. The price of the shares required to occupy a standard sized ‘single room’ ranges from approximately $100,000 to $500,000 depending on the Floor. There are three monthly costs components. First, depending on how the purchase was financed, there can be considerable monthly interest repayments. Second, there are floor fees/clerk fees. Third, owning shares in Selborne or Wentworth Chambers includes an obligation to pay a monthly maintenance levy for the upkeep of the building. For a single room, the maintenance levy is approximately $1,500-2,000 per month. There is no obligation to pay rent.
What are the specific considerations for buying into chambers with commercially leased premises?
As noted above, there is often still a requirement to buy shares, but it is usually considerably less than the Selborne or Wentworth model. The shares for entry level rooms can cost between $10,000 - $100,000 depending on the chambers. Other chambers (such as Level 22 Chambers) do not require consideration to be paid for shares. In addition to your interest costs from financing your share purchase (if required at all), there will also be monthly floor fees/ clerk fees, and an obligation to pay rent.
Is there a rental bond?
Most commercial leases require the tenant to put up a bank guarantee or rental bond equal to 3–6 months’ rent. As a shareholder, you may be required to provide a personal guarantee or loan or contribute capital to the chambers to maintain the bond. It is worth understanding how the chambers manages this issue because it may involve a call on your capital.
How does the shareholders agreement govern rent costs among members?
The shareholders agreement typically sets out how much each member is required to pay to the chambers each month to meet the rent. These are typically based on room size (as a percentage of the overall), but can vary based on other factors, such as seniority or whether the room has a view. You should ensure that you are comfortable with the equity of the structure. The shareholders agreement may also provide for how rent is divided in the event that there are empty rooms. Your obligations as a shareholder may include exposures you may not have necessarily considered.
How long is the lease?
It is critical to know the length of the lease the chambers has entered into with the landlord. The price of a room in leased premises is significantly impacted by the remaining length of the lease. If the lease is approaching its expiry and the chambers has not planned for this, it can cause the price of rooms to collapse. If you are buying chambers in leased premises, check to see what the chambers has planned to manage the length of its lease as this often involves significant negotiation and advanced planning among members.
What are the other key lease terms?
Commercial leases have annual agreed rent increases (usually around CPI) and occasional market review rent increases. These are important to know so you can plan ahead for increases in your monthly costs. Commercial leases also include ‘make good’ obligations at the end of a lease that require the leased premises to be reinstated to an empty shell. This can be expensive. Simply put, understanding the lease terms will help you understand many of your key obligations as a shareholder.
What is the value of buying a room?
We do not raise the above matters as reasons against buying in to chambers. Our goal is to inform so that you can be better informed about a process that is a mainstay of the Sydney Bar but not often openly discussed. We note that there are significant benefits to buying chambers. These include:
Many barristers crave certainty about where they will be operating their practice from in the near and long term. Owning chambers provides significant certainty.
Access to intellectual capital and practice support
There is value sharing space with colleagues that can help solve your problems and support your practice at the Bar. This largely depends on the culture of the Floor and how its members conduct themselves. You may never be able to quantify it but when it matters it can feel like the cost of membership was worth it.
Access to work streams
You may be able to directly attribute a stream of work you get to your chambers. If you are able to do that, the business case for the cost of owning chambers can be very clear.
Once you are in your own room solicitors may perceive you differently, especially relative to other people at your seniority level. This may be less relevant in the era when in-person meetings are less frequent, but it still carries weight.
Being a part of something
As a member, you form part of a group of other barristers who can provide friendship and professional support. You can also contribute to the strategic direction and culture of your chambers. Many barristers find satisfaction in advancing the strategic objectives of the Bar by sitting on the Chambers Board or Readership Committee.
Having somewhere that is yours
Once you own your own room you can furnish and adorn it, add a music system, books and paintings, and in other ways create a work space that is effective, speaks to your character and generally makes you feel happy.
How do I apply to become a member of a Barristers Chambers?
When a room becomes available to buy, a Barristers Chambers may solicit applications to buy the room (known as ‘membership applications’) from prospective candidates. Applications may be solicited from existing licensees or readers at the chambers. The chambers may also solicit applications or interest from barristers outside of the chambers. Opportunities to apply are often not advertised, particularly in respect of more popular floors. Opportunities can arise at any time. It can be useful to have a strategy. In your own chambers, that should involve understanding how membership applications are determined. Either the entire membership will be involved in a formal voting process, or the Chambers Board will determine membership applications. If you do not know, then ask. Getting broad exposure to your chambers members is helpful, and consulting with your Clerk and tutor about how best to achieve that is an important first step. If you are interested in buying into another chambers that you are not presently a part of as a licensee or a reader, you may need to advise them of your interest. This can be sensitive, because you may not want your current chambers to know. In these cases, it is helpful to identify someone from your desired chambers that you feel comfortable confiding in to ask them about the ideal way to advance your interest. Some chambers will have a policy or preference that supports existing readers and licensees, so a viable strategy may be to move across as a licensee in the first instance. It is always worth taking advice on these matters from more experienced barristers.
In the post pandemic world, how can chambers respond to changes in work practices to enhance or maintain the value of chambers ownership models?
Chambers are highly built-up physical environments. If work practices are changing in a way that existing physical chambers environments are less responsive to modern legal practice, chambers will take time to adapt. However, there are measures chambers can embrace now to address this issue.
Continued administrative support for remote working – The Bar and Barristers Chambers responded incredibly well to the technological challenges posed by COVID- 19 and demonstrated its capacity to be innovated in the delivery of legal services and chambers’ administrative services to barristers. This should continue.
At other Bars, it is commonplace for barristers to share a room. This is not a widespread contemporary practice at the Sydney Bar, although some chambers do allow it, and in some cases even allow room ownership to be shared. If working from home remains a feature of post pandemic practice, room sharing should be considered as part of the chambers policy and cultural setting. It can reduce the holding costs of maintaining ownership of chambers, facilitate flexible working, and justify the business case for chambers ownership for barristers who may not occupy a room full-time.
Give barristers reasons to be in chambers
If the value of chambers is connection to people and access to intellectual capital, Barristers Chambers need to foster this collegiality through social and other chambers activities that encourage interaction.
More specific support for readers and licensees
– If the practice of working from home remains commonplace, readers and juniors may find it harder to establish a profile within their chambers because there are reduced opportunities for face-to-face interaction. Barristers Chambers should be aware of this and think innovatively about how to promote and raise the profile of new barristers to its existing members, not just in the year, but in future years as well. BN