After finding the ideal tenant, prepare for a lease agreement and include all the necessary points like who will maintain the property, penalty on property damage, process of premature termination of lease, etc.

Recall the condition; they didn't want you to see it all prematurely. 

like Greg said, I think you have prematurely given the money back.

In my opinion, there should always be penalty for terminating (breaking) a lease prematurely, i.e. moving out before the lease term ends without mutual agreement.

That would be premature from what you tell us.It wouldn't matter to me if the tenant was a co-worker, family, or friend.

Setting aside that it is premature at this point, ultimately if it came down to it, it may make sense to pay the debt to avoid any adverse credit consequences and then at that point sue to get it back.

Furthermore, Tenant shall be responsible for reasonable advertising and redecorating expenses, lost rent, and other expenses incurred by Landlord as a result of Tenant's premature termination of this Lease.

Not all of them, but a high enough percentage that the fee offsets premature wear on flooring and odor related containment. 

In the end, we would rather have someone called pre-maturely than a potentially damaging (i.e. overflowing toilet) situation persist.

And my son and daughter n law have a premature baby in St Louis hospital" They are looking for a 3BR for "about $350".