More info for you...
First off, thank you to everyone that has replied. This ordeal has been a blow to our family.
Before we purchased our home, it was an adult foster care facility that housed several mentally challenged women. When the owner (not us) decided to retire and close the home (about 7 years ago), all but two of the women were placed in other foster care / assisted living homes.
We purchased the property from the original owner and one of the conditions was that if the remaining two women chose to live in the house, they could as tenants. Both ladies had been living in the home for several years and didn't want to move.
When the foster home officially closed, the court decided the two ladies were no longer "wards of the state" and could live wherever they chose. Both ladies were in their early 60's when we purchased the home. The original owner moved into the studio apartment at the back of our property and became their payee representative for their Social Security.
One lady developed a long-term illness and it was in her best interest to move her to an assisted living facility so she could receive the medical treatment and care she needed.
The second lady (Tenant we are discussing) never wanted to move. With her mental condition, she is smart (she volunteers at the local hospital mail room and at the local Senior Center five days per week), but just a little slow on the uptake. Her family has asked her for years to move, but she always felt this was her home. We have even taken her with us on family vacations, included her in family events, and she was part of our wedding.
We believe that her family finally pressured her enough to sway her opinion. Nothing has changed in her living conditions and she was always well cared for by not only my wife and I, but also our children would help as well.
Earlier today, her sister-in-law asked us to return this month's rent. We stated our side that since the Tenant, nor the family, gave us notice, we were not obliged to return the rent money. The sister then said they were going to sue us in small claims court. We have no intention of taking our Tenant to court.
I know that sounds crass, but we have already budgeted/spent the monies with the household expenses (mortgage, utilities, food, etc.). We are a strong Christian family, but my Business Law professor always reminded us that even as Christians, we should allow ourselves to be taken advantage of with business matters. We own other rental property and have been told by past and current tenants that we are the best landlords they have ever had, but we do make clear that this is a business.
To answer the questions posted in the replies:
Jacksgal--No. We do not want this to end this way, but the Tenant is an adult and we have always respected her decisions.
MorgansDaddy--Unfortunately, we have learned from past tenants that even though you do what's morally right, it may not be right with a business. That lesson cost us over $6000 in lost rent and property damages from an ex-tenant that we will never be able to get back.
Army Judge--We are only talking about $400. Overall, I did the math and we are talking just over $86k that she has paid to the owners of this property.
Again, thank you for your advice and I hope this information sheds some more light on the situation.