Tenant Asking 4 Lower Rent B/C City Won't Allow Renting Basement

[Account Closed]

Hi,

We are renting out a house to our contractor who did work on the house and he became our tenant. Our property manager who is friendly with our tenant has informed us that since the inspector says we may not use the basement room as an additional bedroom due to the size and location of the window...the tenants now say they only have a 3 bedroom and not a 4 bedroom and would like to adjust the rent accordingly as they cant rent out the basement per code enforcement.

A bit of a background, they went through an awful month last month with multiple flooding and multiple sewage backups. Each time there way anything we took care of it in a timely manner. We even gave them a price reduction of about 50% last month. We even attended to some things that we didn't need to and fixed them because we are keeping this house for the long term. The tenant originally had someone on the lease that was going to rent out the basement but when it got flooded his tenant left and asked us to reduce the rent by a 1/3 for the rest of the year b/c he lost his tenant  vs. fix the basement problem but we decided to fix the basement problem b/c we are in it for the long run.

We want to be fair to the tenant and keep him comfortable but to prevent from being taken advantage of. Any recommendations how to smooth this with the tenant? Should we do so something to spruce the house up? Should we give him a permanent discount now to compensate him that it is a 3 bedroom and not a 4 bedroom? We want to be objective and fair