What is an allowance in a construction contract?

An allowance in a construction contract refers to an estimate for a category of home fixtures. This monetary figure is established to cover the costs associated with items that are not yet specifically selected or priced at the time the contract is signed. For example, allowances may be set for flooring, cabinetry, or appliances, allowing the homeowner some flexibility to choose products within a specified price range after the contract has been finalized. This practice helps to ensure that the builder can provide a comprehensive proposal while still accommodating the homeowner’s preferences, without the need for determining every detail upfront.

In contrast to the other possible answers, the concept of allowances specifically pertains to fixtures and finishes rather than broader financial aspects or cost categories. The idea of unforeseen costs is more aligned with contingencies, while a predetermined payment schedule refers to the timing and structure of payments rather than individual item costs. Lastly, a fixed charge for labor costs does not encapsulate the flexibility and variability that allowances are meant to address regarding material choices and their corresponding prices.