I think you should figure out what the rules and regulations are in your specific state because that will make a difference. 

Renting out rooms in a single-family house may be subject to special regulations in some places.Have a well-defined plan in place for room rentals.

That code section states:(1) “Prospective owner-occupant” means a natural person who presents to the trustee an affidavit or declaration, pursuant to Section 2015.5 of the Code of Civil Procedure, that:(A) They will occupy the property as their primary residence within 60 days of the trustee's deed being recorded.

Let them know you want to be responsive to important issues but you also expect they will respect your procedures and the time of the people doing repairs.  

I suspect they have a procedure to deal with this and it may actually involve having their inspector just go to the office to inspect files and determine that info themselves. 

Multi by definition in law and regulation begins at 5 units.

We are about a year ahead of everyone else on our procedures.

I personally have nothing but nightmare and horror stories, not necessarily problems with the tenants, just problems with the procedures and the paperwork, poor communication from the HUD caseworker etc... 

Or alderman allowing case by case currently city wide but the regulations would make it a right of property owners without alderman approval needed? 

We have since terminated the relationship with this firm and have reinforced our standard operating procedures to lessen the likelihood of a similar occurrence.