It's quite clear that the purchase comes with an existing tenancy over the property, which you have accepted and agreed to continue to subsist through your conduct in accepting the deposits. So you now step into the shoes of the vendor as the landlord. Is there a tenancy agreement entered into between the vendor and tenant prior to this?

So, it doesn't really matter if you have an agreement with him.

Everything is verbal or through conduct - that's why it becomes messy.

By right you ought to have asked the vendor to give him notice of default of payment and terminated the tenancy with one month's notice back in December when he defaulted in payment of rental.

Now, you have not terminated the tenancy in writing, but through the conduct of both parties. it does appear that the tenancy has been determined through agreement - you have refunded to him one month's rent and he has accepted it (cheque for that cleared?)

So one good thing is that he can't later claim that you had unlawfully terminated the tenancy and/or unlawfully evicted him.

You might want to put something in writing now to state:

1) Another one month's deposit is to set-off rental for Dec 2011; and
2) Cheque No___________ has been stopped as you had, on xxx date, inspected the premises and discovered the following defects and damage to the property and/or the premises which warrants the following repairs:

* list down all repairs to be made and estimated costs.

Also state and list down unpaid bills, with the bills annexed to it.

At the bottom, inform him that the cheque for payment was stopped as the monies would be used to make good the said repairs and settle the outstanding bills.

[Is the sum of RM1600.00 enough to cover everything? If not enough, you need to put in another clause which states that you have the right to initiate legal proceedings against the tenant in the event the deposits held is not sufficient for above matters]

Hand it over to the tenant and get it acknowledged by the tenant on every page.

Then you proceed to do the necessary - if got excess, refund it to him.

He has moved out? If you can still meet him might as well go by hand. Or perhaps courier. Registered mail is not mandatory, and it is not the speediest method. You wait ages to get the AR card back.