No Matter What...
If you live in Florida, hurricanes aren’t just a possibility—they’re a guarantee. For HOAs and condominium associations, storm season can quickly become a financial nightmare without proper planning. A strong emergency fund isn’t just a safety net; it’s the difference between a fast recovery and months of financial strain. Today, we’re diving into why emergency funds matter more than ever, how to build them, and why your board should start hurricane-proofing its budget now.
Why Emergency Funds Are Non-Negotiable
The unpredictability of hurricanes has only increased in recent years. According to
NOAA’s hurricane outlook, the last five years have seen stronger, slower-moving storms with record rainfall. This isn’t just about damaged roofs and landscaping; flooding, power outages, and infrastructure damage can cripple a community. When your board doesn’t have reserves, you’re forced into unpleasant options: issuing emergency special assessments or taking out loans with high interest rates. Both options upset residents and increase long-term costs.
Emergency funds protect property values and community trust. When a hurricane hits, residents expect quick repairs, safe conditions, and strong leadership. Associations that lack funds often face backlash, lawsuits, and even state compliance issues. Having a healthy reserve is not just smart—it’s essential.
How Much Should You Save?
The rule of thumb is three to six months of operating expenses. But in hurricane-prone areas like Florida, six to nine months—or even a full year—makes sense. A
reserve study can help your board calculate the right amount. These studies examine long-term costs like roofing, elevators, and common-area systems, factoring in inflation and climate risks. Florida Statute Chapter 718 requires associations to maintain reserve accounts for specific items, so compliance isn’t optional.
Funding Your Emergency Account
Building an emergency fund takes planning. One approach is gradually increasing your annual contribution by two to four percent each year until you hit your goal. Another option is allocating a “disaster contingency” line item in your annual budget and prioritizing it as much as insurance premiums. Some associations use high-yield savings accounts or short-term municipal bonds to make reserves grow slightly while keeping them liquid. Always consult your association attorney and CPA for compliance with Florida’s reserve requirements.
If your association is behind on reserves, now is the time to start. Waiting until storm season approaches will only increase the risk of emergency assessments. Boards should schedule budget workshops focused on disaster planning and review their financial health regularly.
If your board needs help creating a funding strategy,
contact Precedent Hospitality for guidance from experts who understand Florida’s unique challenges.
Insurance Alone Is Not Enough
Many boards assume insurance will handle everything, but that’s a costly misconception. In Florida, most policies come with significant wind and hail deductibles, often two to five percent of your insured value. That means on a $5 million building, the deductible could be $100,000 to $250,000—money your association must pay before the insurer covers a single repair. Some policies also exclude common elements like fences, landscaping, and recreational facilities. This is why a well-funded reserve is crucial. Insurance and reserves work together: one covers catastrophic loss, the other handles gaps and deductibles.
Keeping Homeowners Informed
Transparency is key to avoiding pushback when raising assessments for reserves. Boards should use newsletters, portals, and town hall meetings to explain the real cost of not saving. Show homeowners scenarios: what happens if the reserve account has zero dollars when a Category 3 storm hits versus having a nine-month cushion. These conversations build trust and prevent accusations of mismanagement later.
Consider directing homeowners to educational resources such as
FloridaDisaster.org and Ready.gov so they understand why these measures matter. Sharing visuals and real-life examples can make a huge difference in homeowner support.
Post-Storm Recovery Planning
When the storm passes, having a financial plan allows for immediate action. Document all damage with photos, notify insurers within 48 hours, and use reserve funds to begin cleanup without delay. Keep all receipts and maintain a transparent ledger for homeowner review. After the crisis, update your reserve study and rebuild any depleted funds. The goal is to avoid dipping into operating budgets or issuing unplanned assessments.
Tying It All Together
Hurricane season is unpredictable, but your financial planning doesn’t have to be. Strong emergency funds are your best defense against both storm damage and community discord. If your association is unsure where to start, we can help you create a proactive plan tailored to your community’s needs. Schedule a consultation with Precedent Hospitality today and let’s make sure your community is financially hurricane-proof.
FAQ's
1. Why do HOAs need emergency funds for hurricanes?
Emergency funds cover deductibles and uninsured losses, ensuring fast recovery and avoiding special assessments.
2. How much should an HOA save for emergencies in Florida?
Aim for six to nine months of operating expenses, or more in high-risk coastal areas.
3. Are reserve funds required by Florida law?
Yes. Florida Statute 718 mandates reserves for major repairs and replacements.
4. Can insurance replace emergency funds?
No. Insurance rarely covers all costs and often includes high deductibles.
5. How can an HOA build reserves without raising dues too much?
Gradually increase contributions and allocate a contingency line item in the budget.
6. What happens if an HOA has no reserves after a hurricane?
Expect special assessments, loans, and delayed repairs—leading to resident frustration.
7. Are reserve funds taxable?
Generally, no, but always check with a CPA for your specific association.
8. Should reserve funds be in a regular bank account?
Use insured accounts or short-term investments for safety and liquidity.
9. How often should boards review their reserve studies?
Annually, or immediately after a major storm or significant expense.
10. Can owners opt out of reserve contributions?
No. Reserve funding is a shared obligation under most governing documents.