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Thanks for your quick response.
Well, she was expecting me to keep it, and mentioned this on a number of occasions. She even asked me to take it as payment for one of the month's outstanding rent. She also left me a voicemail yesterday as soon as she received the letter to discuss coming to some agreement so as not to have to go to court.
Then later yesterday afternoon I received a text from her asking if the deposit had been registered in a scheme. I haven't spoken to her yet as wanted to be fully aware of all facts first before I entered into any discussion with her.
Okay, thank you. Grateful for your advice, that does help me a lot.
Also, something I meant to mention in my initial email (which I don't think will have any bearing on this), but just so you have the full picture is that she took out the tenancy on her own as she is on benefits and was claiming housing benefit etc. At the end when all of this has happened, I also found out that her boyfriend was actually living there full time for the whole of the period she had the tenancy - he was also working. I know I can report this to the Benefit Fraud Hotline from that perspective, but just wanted to give you the full facts too - whether this invalidates the agreement etc.. I don't know?