Retainers vs. Deposits-So what is the difference?
As you know, the words “retainer and deposit” are used interchangeably. Meaning, we need to be careful with saying one thing and meaning another. Or vice versa. However, if we don’t know the difference or why it matters, it’s easy to just say f’ it, right!?!
In a definitive sense, a retainer is a fee that is paid in advance in order to hold services (ie. a wedding or event date). While a deposit may also reserve a date, it is returned when the services have been completed. A retainer is by default non-refundable and is not returned. Instead, it gets applied to the total.
Think of a security deposit for an apartment or a cleaning deposit for an event venue rental (separate from the actual fee for the event cost itself). These are fees that are separate from the total. There is also an indication that should things go as planned, it will be returned.
More specifically, if you do not plan on returning the fee that not only secures you doing work, but you want to also apply it to the total owed, this is a retainer. This is not a deposit.
Why does it matter? If you want the retainer to be nonrefundable, first don’t call it a deposit! Calling it a deposit sounds like you will be returning it. And second, explicitly just in case, say in the contract that the retainer is nonrefundable.
You can alleviate some confusion even if there is confusion about the term used and what it means by explaining what you mean. Have a contract that has a descriptive fee schedule and process. And, a refund policy. Every little thing helps.
If you want to make sure you are up to speed on contracts/good to go, please reach out for a no cost 30 minute phone or in person consult. At Rational Unicorn Legal Services LLC, we are big on talking these things out and making sure you have the best processes possible for the services you are trying to offer for your clients.