Why N9 & N12? One or the other - NOT BOTH. If the tenant agrees to N9 you don't need to compensate him at all.

It seems your tenant wants his deposit back. This is not compensation for leaving. It's money he pre-paid in rent.

Usually you would apply this payment to the last month of the term. Since you and the tenant agreed to terminate a month early, he does not owe rent for any months not living in the unit. Essentially, you are agreeing after the fact that his term will end at 11 months instead of 12 if you go with N9. The pre-paid rent should be applied to the 11th month or returned to the tenant (if 11th month already paid.)

If I were in your shoes, I would not have agreed to end the tenancy early. You don't have to let him out of the contract early, unless it serves you to have him out a month sooner so you can move in sooner.