Even if they believe they can, its a different story with you must confront a tenant on an issue. 

How’s the best way without causing confrontations?

Perhaps its the "more-work" and confrontations your manager has an issue with, this manager sales their own mind thats its a legal issue to make their self-feel high and mighty.

Have you taken a trip down there to confront them in person?

If they didn't find drugs you have a police report to show it and you confront the HOA with that but might not help.    

When he drove by the home he saw our For Sale Sign and felt that something is wrong and decided to call me.The potential "Tenant" sent me screenshot of the entire conversation and also a recording of the call where he confronted them and asked if this is a scam.

When I confronted him that these were fraudulent charges and I wasn’t going to pay, I told him if he kept harassing me, because he’s calling me five times in a row at three in the morning telling me to give him his money, I was going to press charges and take him to court.

It would help if you were prepared to handle confrontations or difficult conversations with your friends/tenants because it is bound to happen eventually. 

My dad is just a non confrontational guy and doesnt want to deal with it.

There is no need to create situations that can cause confrontations.