Unfortunately, municipalities, and ultimately most likely courts too, are not keen to accept this argument as a barrier to liability for whatever use or physical infractions exist on a property.

Therefore stick to infractions and litigation, where you add great value and can charge accordingly.

I'd keep it simple, Application denied.Your going to have to make this type of decision on each applicant.Do you have a set criteria for your rentals.. credit score number, income = like 3 times the rent, verifiable rental history,, should show deposit returned , no lease infractions... if deposit wasn't returned what was reason, was lease term completed..  

Give her lease buy out option mutual termination and be done with it if she can't come up with that then .. you'll have to either fish or cut bait.. meaning,, fish for the lease buyout,,,,, cut baits is just say OK you have XXXX days to move,, if i see the guy here I'm writing up a lease infraction and will file for cause for unathourized tenant..YOUR THE BOSS ,, your rules.. 

Here's my experience: accept the Section 8 applicant, inspector comes about a week after; he's required to fail you based on one minor infraction, such as a loose wall plate, missing fire extinguisher, smoke alarm without battery, etc.

You need to start papering them with a notice to cease and follow it up with an inspection and a notice to quit. keep a vigil eye on the property and add addendums to the notice to quit documenting every infraction and abusive action on their part.

Is the cost of installing any equipment and constant monitoring worth reducing occasional infractions? 

Those fines are not for minor infractions, they were probably in violation of key parts of regulatory requirements and repeated several times along with other minor infractions.

She got rid of pet so she's complying, and I wouldn't change a thing, if you see the pet in the future, you can choose to give her a lease infraction notice and or termination.

Additionally, you need to know if the water company found code infractions or are they just referring to the one issue of a gate valve missing?