Unneeded Repair Letter Request Letter from Tenant

[Jason D.]

I could use some advice.  I have one property that has been rental for 13 years and I am experiencing my first major tenant issue.

Tenant has had control of the property for approximately one month after signing a lease with a clear as-is clause.  After moving in they began to complain of a cat urine smell (which does not exist) and demanding that I replace the carpeting.  I had all carpeting cleaned and bio treated before they visited the property for their first showing.

- I gave them a reasonable offer to replace the carpet with small consideration for them and I also offered them to move out and not pay the lease breakage fee, both of these they rejected

- They then called the city inspector.  The property was inspected and deemed to have no violations

- I have now received a letter from the renter demanding that I replace the carpeting and pad throughout the townhome within 14 days.

- Given the fact pattern it appears that they are aiming for a Rent Escrow Action against me in court even though they have no basis.

Questions

- Should I respond to the repair letter?  If so, what should I respond with?

- Do tenants actually take cases like this to court?  Good news is my lease agreement requires repayment of attorney and legal fees to prevailing party.

- Should I engage an attorney to prepare for lawsuit?

Thank you for your help!