How do architects calculate their fees?

Broadly speaking, there are three ways an architect might calculate their fees:

1. As a percentage of the construction cost

Appropriate for: Projects where the scope or extent of the work isn’t clearly defined. The percentage is based on the construction costs (excluding VAT), as this can be aligned to the likely time invested by the architect.

How it works: An initial construction budget is established before work starts, with the architect’s fee based on the agreed percentage of the total. If the construction budget is revised, for example, due to significant changes to the project, the fee may need to be adjusted.

Advantage: Fees based on a percentage of the construction cost an gives you a good indication of the final fee. Many architects agree to a variance of up to 10% of the construction budget before adjusting the fee.

Disadvantages: If significant changes are made to the design of the project, the construction costs will increase and the architects fees may need to be renegotiated.

2. Lump sum

Appropriate for: Projects where the scope of work is clearly defined, allowing the architect to give an accurate forecast of how much time is required.

Advantage: It gives clients more certainty over costs but if significant changes are made to the project, the architect may need to renegotiate their fee.

Disadvantage: Lump sums, based on an estimate of time, may not always represent the best value for money as they are likely to take into account some risk of changes to the project. If the project changes significantly the architect may need to renegotiate their fee.

3. Time charge

Appropriate for: Projects where the scope of work is less well-defined, such as feasibility studies that assess whether a project is viable. Time charges are similar to ‘pay-as-you-go’: the architect gives you their hourly rate and will cap their hours too, only exceeding them with client approval.

Advantage: Time charges are flexible and can be particularly effective at the start of the project when there’s little indication of how much work will be involved.

Disadvantage: The time charge method is open-ended, so it is a good idea to ask the architect to provide an estimate of how much time will be needed at each stage of the project.

In this video Taylan Tahir of MATA architects expands on how architects' fees are calculated.

Additional factors…

Whether your architect proposes to base their fee on a percentage of the construction cost, a lump sum or time charge, there are a few factors to take into account, such as:

Are there likely to be changes to the design part way through a project? If so, this will impact on construction costs and the architect’s time, so their fee may need to be renegotiated.
A property that is listed, or in a conservation area or Area of Outstanding Natural Beauty (AONB) is likely to require more statutory consents than other projects, so the architect’s fees are likely to be higher.
Payments to local authorities for the planning application, building control etc, are in addition to architect’s fees.
The architect’s travel and printing costs are in addition to their fee.
VAT will be charged on the construction costs and usually the architect’s fees too.

When to pay

The architect will usually invoice on a monthly basis. Or they may invoice at the end of the RIBA stages of work as follows:

RIBA stages 0-3 (feasibility studies; concept design; planning): 35% of fee
RIBA stage 4 (technical design): An additional 35% of fee
RIBA stages 5-6 (construction to handover): The remainder of fee (30%).

Don’t forget…

You don’t have to pay for the entire project using just one payment method. You may wish to agree separate fee structures for different stages of the project. For example, it may make more financial sense to pay a time charge for a feasibility study at the start of the project, followed by an agreed percentage of the construction budget, or a lump sum, for the later stages.
It’s possible to pause the project at the end of any stage, before progressing to the next (RIBA stages 0 – 6).