To contractors, allowances in contracts may be self-explanatory,
but owners often find them confusing. A
typical section on allowances may look like this:
Bathroom fixtures $20,000
What contracts often don’t explain is, what happens when the
full value isn’t used? If I only spend $8,000 on the cabinets, do I then get to
allocate the $2000.00 to another category?
If not, why not?
Who is responsible for buying the materials? Will the checks be made out to the General
Is the General Contractor charging a mark-up on
materials? Will this include change
Contractors often find that owners will claim that they can
find materials and supplies more cheaply on the internet. It is the contractors’ job to explain to the
owner that he has a relationship with his suppliers that ensures timely
delivery and good quality.
How will overages be charged? Will the contractor issue a
written change order, or will the owner pay for the materials directly?
What will be the level of quality for materials? I once handled a dispute over the definition
of “builders-grade” toilets. It is
better to include brands and specific choices in the scope of work to prevent
Include a disclaimer in your contract for owner-supplied
materials. Require the option to provide
a substitution if an item is not available for an extended period.
Make it clear that manufacturers’ warranties will be passed
on to the owners. Delineate
responsibility for registering products or obtaining rebates.
Don’t assume that an owner will know how allowances work
just because they are included in your contract. Provide the additional information listed
above in order to avoid disputes!