Which is why insurance is best, they may go after your policy, but they will be fighting very deep pockets defending you.

It looks like more people (not on the lease) are living in the apartment (2 to 4), drinking, smoking, fighting, load music and partying goes on until dawn.

Has anyone ever dealt with a situation like this and is there anything I can do to fight it if they can cap the number of rentals?

They shared with me a little...the sister has poor credit and the sister-in-law got into a bar fight. 

Nicholas W. is on the right track on what you should do in this situation.As a property manager for the last 7 years, I have found that there are better ways of dealing with tenants when things go bad then to fight it out in a legal battle on who is suppose to do what and what the contract says.If it were me, I would approach the tenant with 3 different options:1.

You will spend more time fighting with them to do it properly that it is worth.

If you don't want your HOA sticking their nose inside your door, I recommend you start contacting the neighbors to raise awareness and fight this before it is too late.

I think I would try to fight it if I hadn't heard anything about it.

There will be a lot legal fights related to SB1350 from both sides yet to come in AZ........

Sounds like a fight broke out and someone was shot and killed.