An allowance is a budgeted dollar amount set aside in a construction contract for items the owner hasn’t finalized yet, such as light fixtures, flooring, or countertops.
Contractors use allowances so a contract can be signed before every finish selection is made.
What Does an Allowance Typically Cover?
- Light fixtures
- Flooring materials
- Countertops
- Cabinet hardware and similar finish items
Why Are Allowances Important?
A contract might include a five-thousand-dollar allowance for kitchen countertops; if the owner picks a pricier stone that exceeds it, the difference becomes an added cost. Allowances are a common source of budget overruns when owners underestimate what their preferred finishes actually cost.
Allowance vs. Contingency Allowance
An allowance covers a specific, known category of finish selections not yet made. A contingency allowance is a broader reserve for unforeseen problems, like hidden damage, rather than for finish choices the owner simply hasn’t decided on yet.