The tenant cannot use the security deposit to pay the last month's rent, however you are allowed to keep the security deposit to cover unpaid rent. The distinction is that for the month of July, he would still be overdue on his rent and is subject to whatever fines you have outlined in your Residential Tenancy Agreement. If you don't have any such fines, I would highly recommend that you remedy this before you re-rent to another tenant. I charge $5/day, but the amount is based on the mortgage and other costs that could be incurred as a result of the rent money being applied late.
Going to court can be expensive and time consuming. Since your tenant is a schister, you probably won't have much success in trying to get him to pay up. But maybe you can convince him to work with the
Residential Tenancy Dispute Resolution Service (RTDRS), and maybe some kind of repayment schedule can be arranged. To encourage this solution, you could gently "threaten" legal action and reporting him to the credit bureaus for non-payment of rent. If he doesn't care about his credit rating, then remind him that many landlords will screen potential renters by examining their credit report and having a past non-payment of rent will definitely cause his application to be rejected.
Once you get him to agree to the dispute resolution, their decision is binding on claims up to $25K. Since you will obviously win (the tenant really has no valid reason to not pay you the rent), the tenant will have to pay up. If he still doesn't pay, then you may still end up going to court to get his wages garnished.
Another option is to pursue "distress" or "distrain" for non-payment of rent. This is where a civil enforcement agency will seize the renters personal property and sell it. The proceeds are used to pay the agency's fees and to pay what is owed to you, any leftover goes back to the tenant. It probably isn't going to be worth it for just recovering 1 month's rent, but it is a weapon in your arsenal that you can threaten with.
