We both decided that she couldn't come here because the baby might die from the moldy smell that permeates the house.

Ceiling Paint if possible, may have to replace panels it its a drop ceiling as the smoke permeates all the pores4.

I'm looking to permeate through every facet of this business with vigor and passion.

Bad news for investors.Recently had an REO listing where the home needs an entirely new roof and the 3rd floor needs to be gutted from leaks that permeated down into the 1st floor kitchen.Never thought an owner occupant would want to buy this house.

wont the other tenants complain about the smoke permeating the building 

Tell tenant frankly that pet smells and you are concerned about getting complaints from other tenants (as if you haven't yet) and clean up costs for pet odor permeating walls/surfaces/floors etc. -- which you want to avoid to avoid having to deduct security deposit charges (or increase security deposits next time around in order to pay for pet cleaning/deodorizing).

Nobody will know why they led you to believe they would sell outright, but sometimes our why we landlord permeates through to why we sell.If it were me, I might find the type of buyer they are looking for (Like in my own portfolio of tenants) and try to make it a win-win.  

Any other ideas to help prevent the smell from permeating our unit? 

Smoke permeates EVERYTHING.

I am wasting materials by getting PT Plywood but it is cheaper (not too worried about material cost in this situation, more for a better outcome).However, he stated we needed to avoid the "gap" so water doesn't permeate through the bottom level.