Real Estate Law
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Regrettably, due to the flooding issue, you need to return their deposit to them. Otherwise, they would file lawsuit against you to force you to return it. The facts according to your post here: basement flooded in June, tentative installation date for new carpet 8/9--more than 30 days after the flooding, which they would most likely argue led them to terminate the lease early and therefore your are not entitled to retain their deposit for early termination of the lease because you broke the lease first by not replacing the carpet in a timely manner.
Thank you for the additional information.
The text message would be helpful and the fact that the insurance and contractor reasons caused the delay would also be helpful. However, it is likely that you would be sued if you retain the Security Deposit. It would then be up to Court to decide whether the retention of the deposit is fair and reasonable or whether you should return it.