Thank you for your responses. Let me clarify that I am interested in knowing what I should do (according to the law) not what I could do (like not return the deposit and hope I don't get sued).
That sounds reasonable to me, but in this case I believe the tenant caused the damage. I can prove they clogged the toilet but I can't prove they were aware of the faulty valve. So in this specific case can I reasonably deny rent abatement?
The tenant is requesting I return rent for the two weeks the residence was uninhabitable. I have already submitted everything to the insurance which has covered repair of the residence but not unclogging/fixing the toilet/drain (>$1000). My approach was I'll swallow the repair but the tenant will swallow the fact he had to live with a friend for two weeks. Initially the tenant was ok with that but now is requesting the rent refund.

