Should I give back the security deposit if they paid partial rent?

[Kleyn Lopez]

I need some advice 

I live in Escondido, CA. I rent an ADU studio for $2200 a month including utilities while I live in the rest of the property with a security deposit of $1000. Because I live in the property and share backyard and garage I created a roomate agreement that resembles a lease but it's not quite.

This month my “Roomates” did not pay their rent. On day 7 After refusing to communicate and work things out with us we decided it to serve a letter to vacate the property within 3 days, which was part of the agreement.

Lucky for us our roomates decided that it worked for them and they’re willing to leave the property by the 3rd day.

My roomates want their security deposit back. They want to pay for the amount of days they owed us (10) which is about $700 and in return they expect their $1000 deposit back. Their argument is that they didn’t choose to leave and break the lease but we serve them the notice to vacate.

I don’t think it’s fair since the agreement was for the $2200 rent to be paid by the first and only after they failed we served them the notice to vacate. My Morgage is $5000 and I had to front load their share of the morgage and likely next months as well.

Should I take their $700 and keep the security deposit? Should I not take their $700 and just keep the security deposit. Should I take their $700 and give them their security deposit back?

What’s the right thing to do?