Habtom - 5:44 pm on Apr 1, 2012 (gmt 0)
the initial price includes domain registration and one year's hosting
Does it also include development fee? If yes, then there is no reason why she shouldn't host it somewhere else unless it is part of the agreement.
If it doesn't, then you should explicitly mention the development fees are waved as far as it is hosted and managed by you. If they decide to host somewhere else, they should cover the initial development fees.