Refund of 1 month Prepaid lease

[Eileen Crowley]

I have a renter who paid me 12 months in advance ending this June 30. She has 2 big dogs who have gotten out multiple times and tried biting the same neighbor (grabbed her jacket - no broken skin) twice. Animal control was called twice over a span of 2 months and our lease is very specific about being in breach by not containing her dogs. I don't want to evict as she has been a good tenant outside of her unruly dogs. She initially asked to move out early in exchange of a refund of the balance of the year's rent payment. My question is around when to refund her. My inclination is to refund her within 30 days after the moveout date but she is citing that that is illegal in TX as prepaid rent can't be used as a security deposit. Do I instead insist that she receive the refund the day she move out? She is specifically asking for a refund May 1 with a moveout date of May 31. Do I have the right to counter? This is my first tenant who is prepaying so all the language I have in our lease is specific to monthly rent.