contract allowances -- how they work

15 years ago

Is the following a correct explanation of how contract allowances are supposed to work?

The contract includes an allowance for something, such as flooring or tile. If the homeowner then chooses something more expensive than was included in the allowance, the homeowner is on the hook for that extra cost.

If the allowance is for something that is unknown at the time of the contract, because of the unknown nature of the extent of either labor and materials or both (say for patching tiles or flooring), how is that handled? Is the homeowner entitled to any advance notice or request for approval (i.e., a change order) if the allowance is going to be exceeded?

(I can certainly see why some posters on the remodeling forum have advised against including any labor in allowances.)

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Comment (1)

sergeantcuff
15 years ago
I think you should be given a change order to sign when the allowance it going to be exceeded. I was given my second change order this morning. The first was for additional costs for my cabinet order (wanted more drawers, some pull-outs, microwave cabinet). Not too much money for some fun stuff!

The one I received today was much higher - asbestos removal costs and heating estimates were higher than my GC realized. Much more money for boring "stuff".

I don't know how labor costs are handled. What if workers take too long because they are inexperienced or take lots of breaks? I would be upset if asked for extra for carpentry, for instance, since it is his specialty, and he and his crew are doing the work. He should have estimated correctly. I do see on this change order where I was being charged $500 for "general requirements including demolition" but now am being charged nothing, so I think my GC is trying to be fair.
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