1 of 2 tenants wants to move out early, new lease or sublease?

[Colin Paarmann]

I have 2 tenants (Tenants A and B) that have been renting our townhome together for about 3 months. Tenant A texted me today saying he plans to move out of state and that Tenant B has a friend that would like to move in. I have an early termination clause (and fee) in my lease that I plan to remind the Tenant A about, but I am leaning towards waiving the early termination fee if the new tenant passes background screening since I won't be losing any rent.

My questions:

1. Should I structure this as a sublease or end the current lease and start a new one with Tenant B and the new person?

2. How should I handle the security deposit if I sublease? Or if I end the current lease and start a new one? There is a minor amount of damage that will need to come out of the current deposit.

Thanks!