Interior damage caused by current tenant - Renew lease or not?

[Phil B.]

The time has come for an annual lease renewal on one of our SFH rentals. We contact the tenants and they are interested in renewing with one request. They want the interior main floor repainted. They have been in the property for four years. We send our contractor over to quote the project and he reports issues of damage. Their dog ($400 pet deposit) has chewed and clawed through multiple portions of walls and door frames. And they have apparently allowed water intrusion to remain under portions of our LVT flooring for a period of months. The quote comes in at $4,850 to get the property back into acceptable condition without all of the trim and door repairs/replacement.

Do you pay the ~$5,000 and renew the lease for tenants that pay on time or start fresh (with repairs and finding a new tenant)?

Thanks.