Can I not argue that it was more of an issue with the drain/leakage in the shower area that let water pass internally? 

They probably have other ways to test for a sewage leakage and may identify the smell as that or not.If you do not have either of these issues, look at the wood in the basement. 

The landlord is in violation of city code which states that "No basement may be used as a habitable room unless floors and walls are impervious to leakage of underground and surface run-off water."

The units are also up down so that is an issue for leakage that I would not want to take on.

The house has a few deferred maintenance issues which include no boots on the roof exhaust pipes that may cause water damage and also a chimney in disrepair that may cause CO leakage from the furnace.

There's also no signs of water leakage from the cracks.

He said he has defrosted it twice and there doesn't seem to be any leakage. 

Cons: expensive, possibility of water leakage (alternatively rent the boiler and then in a case of emergency, tenant will call to a supplier directly) - remove HVAC and put two separate combi-boilers for both units.

There’s no leakage or any obvious water damage.

How about this:1) Regular inspection of all buildings and units2) A clause in the leases requiring tenants to promptly report any signs of leakage, water intrusion, or potential mold3) Consultants and contractors lined-up ready to call, as quick action reduces damage and repair expense.