Fair Market Rent is based on what similar properties in the area are being rented at not on what the value of the house to sell is. Tenants also are allowed to choose to pay above this level, as soon as they pay the rent at that level they consent to that payment.
Your tenants have 0 leg to stand on. They shouldn’t have agreed to a rent they didn’t want to pay.
I would strongly suggest you talk to a specialist in tenancy law. Pay for a consultation because it sounds like these people may be willing to use any excuse to take legal action- you need to be impeccable.
So many problems that can stretch out months or years would have been resolved if the person got professional legal advice from the start. It is well worth it for the confidence and peace of mind as you deal with a deeply frustrating situation.
First: Is this all happening over email? If you have email documenting the complaints on the tap, which were in good working order, you have grounds to charge them for the two plumbers you sent out.
Keep this in writing as much as possible. Save all of their emails.
Your tenants appear to be harassing you and you need to be able to navigate this properly. You have rights as an individual as well as they do. Unfortunately the law can skew in favor of the tenant, though, so remember to be legally impeccable as you go forward.
Best case scenario they just want out of the lease and then it is probably worth it for you to just agree to let them leave early and get them out fast. Find tenants who aren’t jerks.
Worst case they’re going to try every trick in the book to pull one over on you and that’s why you need legal protection.
They’re pulling in (inaccurate) legalese- assume they are willing to take you to court and exercise their rights. Respond in kind by protecting your own legal interests.
You can start out by taking David’s advice and just offer to release them from contract if they aren’t happy- but if that doesn’t work do get professional legal advice.
Unfortunately, amateur landlord mistakes can end up costing you thousands of a tenant is unscrupulous enough to take advantage.