How to handle Surprise in this scenario

Question

A group of kobolds, is played by a player, and finds a group of guards in the woods at night. The player divides his kobolds into two groups: one hiding near the guards, and the other sneaking ahead.

The guards spot the first group, but not the other.

Does either side get a surprise round? (My thought is the kobolds gave up their surprise round by maneuvering, and if they weren't spotted they would still have gotten one)

I ruled (incorrectly) that the guards get a surprise round because they noticed the sneaking kobolds, but the kobolds didn't have any way of realizng they had been spotted.

I think the correct ruling is that nobody gets a surprise round, but combat starts at the initiative of the first guard to act (with those that went before him effectively holding their action). I also think the group 2 kobolds who weren't spotted should not get a surprise round, but have all the advantages of being hidden and enemies unaware of them.

Is this a correct interpretation of the rules? What should have changed?

Answer 1

First, let us make sure a few misconceptions are cleared up. The term 'surprise round' does not exist in 5th Edition and is not a thing. While a creature can still be surprised, the surprised state does not grant its own round.

The rules for handling Surprise are written clearly on page 189 of the PHB (Player's Handbook).

What these rules say is that if one side is attempting to be stealthy, sneaky, get the drop on another side—in this case, your Kobolds—then that side makes a Dexterity (Stealth) check. Which is then contested by the passive Wisdom (Perception) score of the other side. Any creature whose passive Wisdom (Perception) meets or exceeds any of the Stealth checks from the stealthy side notice the threat approaching and are not surprised.

Any creature who does not notice any of the approaching threats, because their passive Wisdom (Perception) is lower than any of the stealthy sides Dexterity (Stealth) checks, then they are Surprised when combat starts.

The moment combat starts, we use the above rules to figure out who is surprised. Then we roll initiative as per usual when combat starts, even the surprised creatures roll Initiative. A surprised creature can not act during its first turn in combat, nor can it take Reactions until it has taken that first turn.

Here is where some people get confused.

If the surprised creature rolls high enough in the initiative, even though that creature can't do anything with that turn, the Surprise ends the moment it ends its first turn in combat (following the initiative order). So if you were hoping to get the drop on the other side, and they happened to be faster than you at acting in combat, then your surprise was successful, but you didn't have an opportunity to capitalize on it and combat proceeds as normal.