To sue or not to sue?

I've just consulted my personal lawyer regarding the tenancy agreement. Ehem....actually is my Law lecturer lar~~Yup, it's Miss Sherin. She's so kind to help us.

Our case is quite complicated. The tenancy agreement is due end of this year. The water pipe in my house is leaking and the house owner is not helpful enough on this matter. The house owner actually called a plumber to repair it, however after almost a year time, the plumber failed to repair it. Therefore we decided to move! Right now the unpaid bills are

Water bill : >RM600
Electric bill : >RM300

The march rental(RM550) is still unpaid. Therefore the whole amount due from us would be RM1450. We paid two months of rental deposit and RM550 of utility deposit. Therefore we have RM1650 on the owener's hand. Logically, we would not lose much if we move out right now.

There's a clause in the tenancy agreement that stipulates that if the rental is remain unpaid for ten days, this tenancy agreement shall absolutely cease and the deposit shall be forfeited by the landlord. Ms. Sherin told us that, the worst case that might happen is the whole deposit would be forfeited and the landlord would sue us for the unpaid rent(RM550). Any normal person would not sue us for only RM550 as the expenses would easily exceed this amount.

She advise us try to get back the deposit instead of letting the deposit being forfeited. Should the landlord refuse to pay anything, we will not lose anything. Therefore she suggested that we write 2 letters to the landlord. One letter is to inform the landlord of the termination of the tenancy agreement and the reason. Another letter is about the refund of the deposit with the heading "RE : set off of deposit against arreas due". She stressed that we must put a "without prejudice" on the top right corner of the second letter so that this letter would not be used against us in court should the owner decided to sue us. This is because, according to the tenancy agreement we would not have any right to claim for the refund of deposit.

Before this, I was worried that the landlord might sue us for future losses. According to Ms. Sherin, the landlord do not have such a right as stipulated in the tenancy agreement. What the landlord could do is just forfeit the deposit and to sue for the unpaid rent.

Right now, need to crack my head to write both of the letters. Need to get it done by this week(only two more days left). As my new house will be ready on Monday!

p/s : Hopefully our landlord is a normal person!