Tenant chose not to rent after paying 1st month rent and deposit but before signing rental agreement, Landlord rejected other potential tenants during that time, verified refrences and credit for this tenant. do landlord need to refund any or all amount? This happened in California, for a single bed room in a 4 bed house where each room is rented separately.

landlord already returned full deposit, how to deal with that month's rent?

I would hold that first month's rent until the unit re-rented, then keep the portion of that month's rent that it was left unrented (presuming it rents in less than 1 month).

This is fair, in that otherwise you would have a different tenant in there who might have stayed, and so your deducting only the money your losing because they didn't follow through on their promise to rent.

- Jon

CA?

I think that means the tenent now gets to live rent free for 1 year.  Lol