Legal Question in Real Estate Law in District of Columbia

First, what you are required to refund is most likely dependent on the terms of your signed lease. You don't indicate the terms of the lease, so I'm unable to tell you what you are legally obligated to refund. As for the tenants obligations, assuming that the lease did not include a term allowing her to cancel the lease agreement prior to move-in and receive a complete refund, she would be obligated to follow the terms of the lease. Once you both signed the lease and she tendered payment, the lease became valid.

Basically, if you have a standard lease agreement, you can probably legally keep the first month's rent. You should definitely place the security deposit in an escrow account. If you have not leased the property by the start of what should be your prospective tenant's second month in the property, you could legally take her to landlord and tenant court and sue for nonpayment. Might not be the nicest thing to do, but I don't know the reasons for her trying to get out of her lease, so I won't judge.

One suggestion is to tell her you will allow her to "break" the lease, but you will keep the 1st month and security deposit for your troubles. Or you could sue for nonpayment if you haven't rented it out. Or you could refund the security deposit. Or...you get the picture. Or finally, you could ask WWJD if HE had a rental property and a prospective tenant wasted His time and then wanted the money back. Sorry, I don't have the answer.

If you reach an agreement with her, make sure to put it in writing. Also, since we don't have all the terms, it may make sense to pay the couple hundred dollars to have an attorney review the lease and go over all of your options with you.

Best of luck.