I've noticed some weird rental market trends, and I wanted to compare notes to see if your experience is the same as mine. 

I like the idea of having a clause in the lease stating that option 2 will go into effect if a notice of potential citation is received, but am curious if the tenants would end up just falling behind on rent because they have already requested that this first fine be taken out of the deposit when they move, due to current financial hardship.

@Bertha Spezzia - Are you saying that there is a permit violation or that you just noticed that they did certain work without pulling permits?

Have you ever noticed when something goes belly up there was a little voice inside of you that was saying ‘this just isn’t the right fit?’

To transition you give your management company proper notice (spelled out in your management agreement). 

My partner and I have had our eye on a property for a while but never pulled the trigger because we were hoping the price of the property would decrease.

...I've noticed those types property here, are located in really bad areas, - wonder if other cities are different in this regard.Raf

Assuming the tenants are on leases, you will have to wait until the leases expire, and I typically give a lot of notice that I will not be renewing.  

If you're living in the property, rent is decreased or non-existent, affecting the property's ability to generate income.RESPA rules are real and have a purpose. 

Generally speaking, holding rents lower will decrease turn over.