What to do when dealing with family?

[Ramon Mota]

After the passing of a family member I inherited a property. The spouse was still living there and the property was under a prenuptial agreement. As we took over the property we had the spouse stay for an agreed 820 a month. This made us take a loss of 300 per month. After a year of this agreement we talked about an increase but they never increased  the rent. We later issued a letter for 30 notice of increase to 900 from 820 and also a due date of the 5th. We also in the letter describe that we will be going to a written agreement. What we got back was a rent check for less than 820 telling us the old date was the 10th and that they pro rated the amount. Also they went on to describe that we can't increase more than 3% or regional CPI whichever is greater in a 12 month as a maximum. We are in northern California in a non rent controlled county, city. I'm wondering what to do in this situation because we want them to stay if they want but need the rent to be closer to what we have going out each month. Like properties in the area rent a house of that size for 1200-1300 per month. Some advise on how to move forward with this or how to respond to the letter.

Thanks for reading and thanks in advance for replies.