Even if I were sued, I document everything and obey the law, so I won't be found guilty.

We're all guilty of overthinking..so when it comes to the final decision, always trust your gut.

Their money has been stolen from both them and you, and making it right is going to have to involve both of you suffering here or the guilty to be found and made to make good.I would explain to the tenant that you're in the hole for two months rent, you realize this is not their fault, but it's not your fault either.

Even if I were sued, I document everything and obey the law, so I won't be found guilty.

Even if I were sued, I document everything and obey the law, so I won't be found guilty.

Even if I were sued, I document everything and obey the law, so I won't be found guilty.

Even if I were sued, I document everything and obey the law, so I won't be found guilty.

.: Flying out of state to do the work and carried tools - guilty as charged!

Also, landlord and tenant are guilty of violating their agreements with the Section 8 program.At this juncture, the landlord should use the security deposit for what it was intended for.... damages, extra cleaning, unpaid utilities, unpaid fees, unpaid rent.  

Everyone else is simply happy with making money that they feel guilty asking for their money back.Finally, you are right that most people won't take action.