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Lease problems with Tenant

Hi, I took a 3 year lease with a tenant, of which 2 are completed. Tenant wants to break the lease now. At time of sign of lease, besides taking 1.5 months of security, I took 3 months of rent on an Escrow deposit and I made them sign an addendum saying if they break the lease, they will pay penalty for rest of lease term and give us Escrow amount and Security Deposit. However, I got a letter from tenant's unhired lawyer stating that it is civil violation to take 3 months of money in Escrow and they are threatening that they will walk out of lease and put the rent in an Escrow and they are offering us to settle by splitting the Escrow amount and let them walk away from the lease. Please help out with any possible legal action we can take and how to go about amicably out of this lease.
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Check with your local NJ Landlord Tenant Law, which can be found on this site under "Resource". I belileve that you can not take more than 1.5 times the rent in security deposit in NJ. Although it may be questionable as to whether the 3 months that was paid into escrow can be considered escrow. This ultimately woulod be up to the judge. Because it is held in escrow and paid in advance many judges would consider it a "security deposit". I personally would walk away with the deal they offered. Otherwise I would consult an attorney before going through the legal system with this. Good Luck.
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