Hi Jessica, if they ban smoking, I believe it will be legal and life for the smoking tenant will quickly become unbearable.

Quote from @Micheal Smoke: Hi, my name is Mike Smoke, and I'm an aspiring real estate investor focusing on multifamily and Section 8 properties in the U.S. as the barrier to entry is much much lower in terms of price compared to Canada and Funding options. 

There's currently a tenant in the house (who I presume caused the smoke damage), but the seller promises that this tenant will be gone before closing.

Depending on the severity of smoke damage and structural issues, it could be a huge challenge for first time flip.

City recently did a building inspection and we noticed the tenant is smoking in the unit (cigarettes and marijuana), food waste everywhere leading to building pest issues, and there are 5 people living there now (3 adults and 2 kids).

Tenant lit candle and burned bed, lots of smoke damage.

Similarly if you currently allow smoking you cannot change the least to prohibit smoking. 

I would mention to Tenant B that I was visiting Tenant A and smelled what seemed like marijuana smoke coming from their side and remind them there is no smoking permitted inside the house.

I do feel like anyone serious enough will just take the two minutes to answer the seven questions, which basically just establish if they meet the minimum requirements (3x the income, Credit Score, No Pets/Smoking, etc). 

Try to anticipate other potential avoidable situations with a follow up inspection to assess the Locksmith’s work and ask your tenant(s) if you can also use the time to assess for other issues such as unchanged HVAC filters, leaky pipes, working shutoff valves, working smoke detector batteries, properly working downspouts, clogged dryer vents, evidence of water damage from leaking roof, etc,etc,etc.