Judge strikes out possession claim over original deposit?

Hi Guys, I am wondering if you are able to help with this situation:

I signed a tenancy agreement back in January 2015 and collected 6 weeks deposit with the rent of £1,075 per month and collected deposit of £1,600. I increased the rent twice – once in April 2019 from £1,075 to £1,200 and then in January 2024 to £1,400. In June 2024 I served the tenant with a Section 21 notice.

No new tenancy was signed and the contract rolled into periodic tenancy after 12 months of original tenancy. As currently rent is £1,400 therefore 5 weeks deposit would in fact be more than £1,600 but I currently hold £1,600. Furthermore, the tenant did not pay rent in JUNE 2024 and since then I am collecting rent directly from DWP.

The Judge has offered 28 days grace period Pursuant to CPR r.55.16 (4) (b) – the Claimant may apply within 28 days of the service of the order for the claim to be restored.

My question is: Do I have to submit a N244 application on the basis that rent is currently £1,400 per month, therefore my section 21 was compliant? Or will the Judge only look at only original amount of £1,075 and I have to refund the tenant the difference?

Do I have to start the whole process again?

Can I mention that the tenant owes me £1,400 in rent and can that count towards offsetting the arrears or do arrears not count?

This is the only property I have and a friend who helped me previously is very unwell and I am not too familiar with process and once possession is granted then I would look to sell this property.

Any help will be greatly appreciated.

By the way there are 2 fee structures for N244 application – £303 and £119 which one would apply?

Many thanks and Happy New Year to all fellow landlords.

Jaz