ILR Set M rejected

Hello -

I am a naturalised British citizen who was previously on a Tier 2 General visa when my husband was granted his first PBS dependent visa. He renewed his Tier 2 dependent visa once I had obtained ILR (though his BRP stated he was a dependent of a settled person), and has now incorrectly applied for ILR through the Set M form. We now know from his rejection and other cases documented on this forum that he should have applied with Set O.

I have copied below the response from the Home Office for reference. Based on this, do we just reply to this email saying we will reapply with Set O, submit a Set O application, and that is all we need to do? Also, we know we will have to pay the application fee again (and should receive a refund for the prior application). Do we need to pay for the priority service again (we paid for Super Priority)? Or when we submit the new set O form, will it automatically be considered through the priority service again?

Please see your immigration history below:
You applied for LTE as a Tier 2 Partner on 22 August 2018 which was granted on 07 September 2018 until 30 January 2021.
On 02 January 2021 you applied for permission to stay as a PBS Dependent which was granted on 02 February 2021 until 02 February 2024.
You currently have an outstanding application for Settlement dated 03 January 2024.
On the basis of your leave as a Tier 2 Partner/Dependent, you do not meet the requirements for settlement on our route as you have not done any time on the appendix FM. Your leave cannot be included in the qualifying period for ILR under Appendix FM, therefore, you have not completed the required period of 60 months under Appendix FM.
As you have not done enough time on route the Home Office would like offer you the chance to make another application to extend your leave within the United Kingdom. In order to do this we will need you to resubmit a new application with another team.
Your current visa expires on 02 February 2024. After this date you are covered by 3C leave. If you chose to submit another application please inform us and we will get your current application refunded. Please take some time to weigh up your options and confirm how you would like to proceed within the next 10 working days by sending an email to the following email address.

Any advice appreciated!

There has been no rejection. You used the incorrect form. Simply apply again using the form SET(O). That will vary the SET(M) to a SET(O) application, citing the previous UAN in your new application. It will be a totally NEW application from scratch with a new timeline. So new fee, new appointment, etc. After ILR, you should get a refund for the previous application

Thank you! Sorry I incorrectly referred to the application being "rejected". But thank you so much for clarifying it is indeed a totally new application, requiring another payment for priority service.