Contract and money terms
These appear in your agreement and on every invoice, and they are the ones worth understanding precisely.
- Allowance — a budgeted placeholder for a selection you have not made yet, such as $30,000 for tile. Exceeding it produces a change order.
- Change order — a written amendment documenting a scope change with its cost and schedule impact, approved before the work proceeds.
- Contingency — money set aside within the budget for unforeseen conditions, typically 10 to 20 percent.
- Cost-plus — you pay actual costs plus an agreed fee or percentage. Transparent, with a total that is not fixed.
- Fixed price or lump sum — one agreed price for a defined scope. Predictable, and it requires complete drawings to be meaningful.
- Guaranteed maximum price — cost-plus with a ceiling, blending transparency and protection.
- Draw schedule — the agreed sequence of payments tied to completed milestones.
- Retention — a percentage withheld from each payment until the work is fully complete.
- Lien release — a signed document confirming a subcontractor or supplier has been paid and waives lien rights.
Design and drawing terms
These describe the documents your project is built from, in roughly the order they are produced.
- Schematic design — early drawings establishing layout and massing.
- Design development — refinement of the schematic into resolved dimensions and materials.
- Construction documents — the fully detailed drawings and specifications used to permit and build.
- Elevation — a straight-on view of a wall, interior or exterior.
- Section — a cut-through view showing how assemblies stack vertically.
- RFI, or request for information — a formal question from the builder to the designer about the drawings.
- Submittal — a product or shop drawing sent for approval before fabrication or installation.
- As-built — documentation of what was actually installed, including anything concealed in walls or underground.
Construction and site terms
These come up in weekly updates and on site walks.
- Rough-in — installing wiring, plumbing, and ductwork inside walls before they are closed.
- Dried in — the point at which the building is weathertight, with roof, windows, and doors installed.
- Envelope — everything separating conditioned interior from exterior: walls, roof, windows, doors.
- Bearing wall — a wall carrying structural load. Removing one requires engineering and a beam.
- Header — the beam spanning an opening such as a door or window.
- Sill plate — the horizontal member connecting framing to the foundation, and a common site of dry rot.
- Punch list — the itemized corrections identified at final walkthrough.
- Substantial completion — the point at which the project is usable for its intended purpose, even with punch items open.
California permitting terms
These are specific to building in California and Greater Los Angeles.
- Title 24 — California's mandatory building energy efficiency standard.
- HERS rating — independent field verification that specific energy measures were installed as modeled.
- Plan check — municipal review of your drawings for code compliance before a permit issues.
- Certificate of occupancy — the document confirming a new building is legally habitable.
- Setback — the minimum required distance between a structure and a property line.
- FAR, or floor area ratio — the ratio of allowable building floor area to lot area.
- Variance — approval to deviate from a zoning requirement.
- ADU — accessory dwelling unit, a secondary independent residence on the same lot.
- Coastal Development Permit — additional approval required for work within the Coastal Zone.
- Very High Fire Hazard Severity Zone — a designation triggering stricter material and defensible space requirements.
Frequently asked questions
What does allowance mean in a construction contract?
An allowance is a budgeted placeholder for a selection you have not finalized — for example, $30,000 for tile. If your actual selection costs more, the difference becomes a change order. Allowances let a contract be signed before every choice is made, but vague or unrealistically low allowances are a common source of budget surprises.
What is the difference between fixed price and cost-plus?
Fixed price sets one agreed amount for a defined scope, giving predictability but requiring complete drawings to be meaningful. Cost-plus means paying actual costs plus a fee, which is transparent but has no fixed total. A guaranteed maximum price combines the two by adding a ceiling to a cost-plus arrangement.
What does dried in mean?
Dried in describes the milestone where a building becomes weathertight — roof installed, windows and doors in place, and the weather-resistive barrier complete. It matters because interior work such as insulation and drywall cannot safely begin until the structure is protected from rain.
What is substantial completion?
Substantial completion is the point at which a project is usable for its intended purpose, even though punch list items remain open. It is significant contractually because it often triggers the start of warranty periods, the transfer of responsibility for utilities and insurance, and the release of most remaining payment.
What is a HERS rating?
A HERS rating is independent field verification by a certified rater that specific energy efficiency measures — duct sealing, refrigerant charge, airflow, envelope air leakage — were actually installed as modeled for Title 24 compliance. It is required for many California projects and is separate from municipal building inspection.
