Do you have a lease in place with them - it should state it there ? If not, then I think that they can leave when they please.
Out of courtesy, they may give you some leeway ?
If they are moving because of damp and structural problems, that seems like a fair enough reason to break the lease early. You certainly should not be thinking of keeping their deposit until the end of the year, what do you expect them to use for their next place?
The deposit wasn't your money to spend, it should have been put aside separately from your own funds. So it isn't the tenant's problem that you don't have it now.
I expect an overdraft or short term loan is your best bet to sort this out.
As I said I have no intention of keeping their deposit. I'm just not like that. The lease says I get proper notice and that after they have moved out they get their deposit back not before. My problem is they want to leave early and my thought process is I should wait till the rental period is up before giving them their deposit back it will give me a chance to gather it. Since they gave me short notice I would be entitled to hold some of it back but I'm not like that I just want to know if I have to produce it before the rental period is up.
When I receive a deposit from a tenant, I reference it with their name (so that I can trace the lodgement easily) and lodge it to a deposit savings a/c so that it is there ready to hand back when they are leaving.
It was not yours to spend so it should be returned when they are handing you back the keys.
I put 'within 14 days' in the lease agreement for the return of the deposit. On receipt of the keys is too soon as you do need to check the property, and a quick inspection might not reveal breakages or soiled curtains. You also need time to check that the utilities are transferred and that the utilities have a forwarding address.
I would suggest that you arrange to meet them a few days after they move out and find the deposit somewhere. I assume that its a cashflow problem and that you still have equity. You are also going to have to finance the structural repair so you need to prepare a mini-business plan to sort the matter out are borrow the funds.
You may be entitled to hold the deposit because of the short notice, but only if the tenant has contributed to the damp problem - lack of ventilation or excessive heating or moisture. However if you have a leaky roof its not their fault.
Problem is lack of ventilation, not from a lack of vents but from them being closed. I have called there several times and told them this.
I get the impression that there is more to this story than we are being told.
The OP talks about a "small structural problem" and about how they s/he doesn't object to the tenants reasons for leaving (and leaving fast) - but then goes on to say that the problem is caused by lack of ventilation and that the tenants were advised of this.
Something doesn't sound right to me.