UK Property Law
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Thanks for your question. It is really more of a practical issue - ie. how to ensure you get the tenant to stay for two years paying rent 1 in the first year and rent 2 in the second.
I would say that the best way forward is to be honest with them the tenant at the outset that you may/are to increase the rent for the second year by granting a new tenancy for that second year, then propose to grant a one year AST at rent 1 (with appropriate break clause if you wish), then serve the notice under s21 of Housing Act 1988 requiring possession at the end of the term of the AST and then upon expiry you and the tenant execute the second AST at Rent 2.
If they take the tenancy at rent 1 saying that they may pay rent 2 in the second AST then they may become settled and wish not to leave. If they decide not to enter in to the second AST then you can take possession of the property and simply remarket at rent 2.
A final note, please tell me you are aware of your responsibilities under the tenancy deposit scheme?
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You're correct in that because the rent is greater than £25, 000,00 it will not be an assured shorthold tenancy.
Be honest with tenant, hopefully he will be honest with and you say whether he is likely to agree to the higher rent. If he is not then you can either let him have the one year and remarket at the end of the tenancy, or find another tenant now who will agree to the two years and the increase.
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