This mismatch stems largely from financing challenges that have caused new starts to plummet.Major markets are feeling the pinch.

Bringing tenants into the upstairs apartments is very hit or miss and will almost certainly cause trouble..

Before you tie up a property, get written confirmation from at least two active fractional-loan lenders that they’ll fund both your acquisition and future resales, retain a TIC-savvy attorney to draft market-standard agreements, and read the city’s condo-conversion code like a land-use deal—fees, timing, owner-occupancy, and any links to rent control or just-cause.

You have have a few things contributing to that like over priced homes, rents coming down, increased  contract defaults, Mortgage rates now dropping fast causing a rebound from renters market back to buyer's market.Unless your into and secure with section 8 and have confidence in that contract and security it is tougher than 5 years ago. 

So if the issue would cause the tenant's thermostat to go out of those bounds, or if there are warming/cooling shelters open locally and the tenants are without heat/aircon, I would definitely treat those as an emergency. 

So their counter argument is "it's worth that much cause we said all the others are"I'm leaning towards a formal dispute.

It seems that you're already aware that CA doesn't recognize series LLCs so that having multiple LLCs while being a CA resident can be costly.Most likely the state where the property is located is where lawsuits would be brought if they are something for personal injury like a trip and fall or something of that nature because the “cause of action” arose in that state.

The last thing you want is a “funds delay” that causes a mortgage auto-draft to bounce.

They’ll rent faster and any damage caused by furniture or wear and tear can be fixed in hours. 

@Collin Silva since you're new, you may find this info helpful:)The Real Estate Crash of 2008-2010 caused real estate prices to crash across the country - but didn't affect rent amounts.