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I assume that it is an assured short hold tenancy because it is a separate dwelling, if it is not a separate dwelling then, although it says is an AST , it cannot be.. If it is, and if he did not protect your deposit and you can prove this, the tenancy is unenforceable.
The correct procedure as you will be aware, is for you to pay up to the end of the term and then, if he doesn't return your deposit, file the dispute. However, I know exactly where you're coming from, the deposit is the last month rent, so he walk away without having paid it, the landlord has not lost anything, and you are not fighting/suing him to get your deposit back. It is very common and tenants do it all the time. Of course, I cannot advise you to do that, but it works usually in practice. Expect the landlord, as you suspect, to come up with all sorts of spurious allegations, but the property was left in a mess, with all sorts of damage.
At least then, he is suing you rather than the reverse and of course, he's unlikely to know that you have the copious photographic evidence that you do. Take particular note of bathroom and kitchen fittings and floorcoverings, because they are a common source of alleged damage.
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I have told you that the correct procedure is for you to pay until the end of the term. If you withhold rent, you are in arrears. You are not allowed to withhold rent because if you do, you breach your tenancy. The legal situation is that you're not allowed to withhold rent or any reason whatsoever.
However as it is the last month the practicality and legality are different.
The landlord told the Council it is NOT a separate dwelling as it has 2 connecting doors, one from the main house sitting room into the annexe sitting room, the other from the main house conservatory to the annexe kitchen. The Council told the landlord that if it was a separate dwelling, then Council Tax would have to be paid on the one-bed property.
From your previous reply, am I right in reading that if it is not a separate dwelling, then although the 'contract' states it is an AST, it actually is not and as the landlord did not place my deposit in a secure deposit scheme, the 'contract' is therefore not valid?
It cannot be an assured short hold tenancy if the landlord lives in the same building.
This explains a little http://england.shelter.org.uk/get_advice/renting_and_leasehold/private_tenancies/assured_shorthold_tenancies
Whether it is " the same building" is another whole debate. So it appears that he wants it to be a separate dwelling for the purposes of this tenancy, but doesn't want it to be a separate dwelling for council tax purposes. That's an interesting concept!
I think therefore, the tenancy agreement is unenforceable on two counts. Of course, if he disagrees, and he decided to take you to court, it would be for a judge to decide. However, if you do not pay the last month rent and he keeps the deposit, he has not lost anything, so I do not know what he could take you to court for other than any damage which he "fabricates".
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