We signed a fix price contract for a new construction. The builder put allowances for tile and septic. We are almost done with the build, there are 5 draw items left. The builder now says the bid price for allowances has changed. That the septic will cost more than he budgeted for in his allowance and he is labeling the difference as a "change order". He bid the septic as an aerobic and we are installing an aerobic and using the subcontractor the builder has chosen. On the tile he quoted $4.5 per sq foot and told me to go buy my tile for no more than $1.5 sq ft and that the other $3 was labor to install. He is using his subcontractor and telling me I have to pay the difference in labor, that it is no longer $3 sqft to install. I have followed all his rules and used his subcontractors. Isn't he responsible for his bid prices. The contract says the bid price is subject to "change orders". The tile is not a change order, it is the original tile from the first email communication we shared. The septic is not a change order, it is the same septic and installer he suggested. Am I responsible for the difference because he called it an "allowance"?
An allowance item is just that: an amount of money allocated in the builder's budget to accomplish or to provide a particular line item. Unless the builder misrepresented that the amount of the allowance would be sufficient to cover particular work or a specific line item to induce you to contract with the builder, the builder generally would not be liable for an overrun of the allowance.
With today's short supply of workers and construction materials, some owners are facing up to six figure increases in the cost of the construction work.
Retain a construction attorney to evaluate your legal situation, and to provide advice.
Good luck.
From your facts, it appears that the total allowance for tile of $4.50 per square foot included $1.50 for material, and $3.00 for labor. If the labor increased and is part of the allowance, then the cost for the tile work has exceeded the allowance. That is the problem with allowances - allowances really do not cap the cost of construction.
Retain a construction attorney to review and evaluate your contract and other documents, and to provide advice. It may be that you can go to the original subcontractor and see if the original subcontractor will honor its original price. But if you interfere with the builder's choice of subcontractors, the builder will likely blame you if anything goes wrong.
Hello,
Here is a great article on What Is A Construction Allowance. Unfortunately, the news is not good. An allowance is an educated guess to be used a placeholder to assist in budgeting. An allowance number is NOT a strict budget or guarantee.
To handle this, some negotiation will be required. One of the things you can do is get quotes from some other people to finish the work. Once you have the quotes in hand, you can evaluate whether it would be worth it to have the current contractor continue. If you find something that's close, see if it is possible for him to split the difference. The alternative is it being something you can live without to stay in budget.
E. Aaron Cartwright III
214.789.1354
Aaron@EACLawyer.com