Serco Buy to Let Mortgages

Serco Buy to Let Mortgages

Who is Serco

Serco is a company specialising in offering accommodation and support services for vulnerable asylum seekers. The organisation has secured contracts for UK asylum services valued at approximately £1.9 billion. Their business approach involves renting properties from a broad array of landlords, positioning Serco in the role of a lessee. By consolidating properties from numerous landlords into a single, extensive portfolio, Serco effectively minimises government expenses associated with asylum accommodation.

What does Serco offer to Landlords?

Serco depends on private landlords to provide properties under a corporate leasing arrangement. In return, landlords receive several advantages, including: 

A 5-year lease offering consistent rent payments from Serco, issued promptly each month. 

A comprehensive repairs and maintenance agreement, with the exception of hidden and structural flaws. 

Serco takes responsibility for utility and council tax payments. HMO (House of Multiple Occupants) and property management services, regular property checks and regular safety inspections. 

Absence of any letting or management fees.

Not all lenders accept Serco agreements.

Typically, buy-to-let mortgages permit landlords to rent out their properties under an Assured Shorthold Tenancy Agreement (AST). However, leasing your property to Serco necessitates a corporate lease agreement instead. Any agreement other than the specified corporate lease with Serco could significantly violate your mortgage terms with your lender. Therefore, it’s crucial to choose the appropriate mortgage lender and product that aligns with this type of leasing arrangement.

Can my lease be longer than 5 years?

While Serco leases can be agreed for longer than 5 years, most lenders will accept the Serco rent agreement when they are 5 years old. If the agreement with Serco is longer than 5 years this can mean it falls outside the lender’s criteria.  

Why should a landlord consider this sector?

Several factors make such leasing arrangements appealing. One key advantage is the involvement of organisations that fully manage tenant-related tasks, offering landlords a relatively effortless experience. These agreements are typically longer than standard tenancies, ensuring a steadier occupancy rate and rental income. This results in fewer vacant periods and less tenant turnover, significantly decreasing the effort required in sourcing new tenants. Gaining a deeper insight into this opportunity enables landlords to manage risks more effectively, maximise their investment returns, and positively impact someone’s life.

Housing Vulnerable tenants 

Individuals may be considered vulnerable for various reasons, including mental health challenges, learning disabilities, homelessness, prior criminal convictions, experiences of domestic violence, seeking asylum, or being refugees, as recent events like the conflict in Ukraine have highlighted. Private landlords play a crucial role in providing housing for those in need, and several organisations facilitate this partnership, including:

SERCO: Designated by the Home Office as the asylum and refugee accommodation provider in recent years. They oversee a large property portfolio, integrating properties from numerous landlords into a single collection, thereby minimising costs for the Government.

Housing Associations and Charities: These entities often lease properties from the private rental market to house vulnerable tenants for up to three years.

This arrangement offers landlords a stable income, with the added benefit of having the property’s daily operations managed by the association or charity. The main advantage of engaging with these organisations lies in their commitment to managing the tenants and the property on behalf of the landlord for the lease term. This includes managing maintenance, time management, and rent collection, significantly easing the landlord’s responsibilities.

Getting the property ready

When planning to lease a property to vulnerable tenants via organisations like SERCO, housing associations, or charities, there are specific prerequisites you might need to address.

These entities often have more rigorous standards concerning various aspects of the property, including: 

Energy Performance Certificates (EPCs): Ensuring your property meets certain energy efficiency criteria. Hygiene Standards: Maintaining a high level of cleanliness and sanitation within the property. 

Fire Certificates: Proving that the property adheres to fire safety regulations. 

Electrical Appliance Testing: Certifying that all electrical appliances are safe and working correctly. 

Decor and General Facilities: Ensuring the property’s interior and facilities are in good condition and suitable for living. 

Knowing these requirements in advance allows you to plan your budget for any necessary preparatory or corrective work. This preparation makes your application process smoother and ensures that the property is a safe and comfortable home for vulnerable tenants.

Buy to let mortgage for housing vulnerable tenants?

A mortgage to house vulnerable tenants is a niche area of the market, It’s not something you can walk into a high street bank and get. It needs careful consideration and research to find the correct lender. At Mondo Mortgages, we have access to specialist lenders willing to accept properties rented to Serco or Housing associations.

Is it possible to get a mortgage on a property rented to Serco?

Yes. Serco Buy to let mortgages are out there. Not every lender will accept properties rented to Serco, but there is a small number of lenders that will accept it. There is also talk of some lenders moving into the sector, which will be good for landlords who use the sector for their main strategy. 

Can I rent my property to Serco on a standard buy to let mortgage?

No. If the lender doesn’t accept renting the property to Serco within their criteria, they won’t be happy if they find out that you are breaking the term of your mortgage. It’s best to find a lender willing to accept renting to Serco. It’s best to speak mortgage adviser who specialises in Serco Buy to let mortgages so they can look into your best options   

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