But she is not trying to do that, she is being responsible and honest with you ... that should be rewarded, not punished.

@Todd Plambeck agree with your completelyalthough the desire to punish the person who tried to screw you over is overwhelming

Going to punish them because the landlord retaliated? 

That said, most lenders don't, but get caught saying a property is owner occupied when its not and the most severe punishment is prosecution for loan fraud.I understand your being anxious to do something as a vacation rental, but I would just ride out the 1 year as owner occupied and then from there, you wont have any issues.

Like I said no one can make them pay nor can they suffer any UCMJ or Non judicial punishment.

Also let her know that you may have to ask the additional occupants to vacate, or be added to the lease, but that you want to work on a solution with her, not just a punishment for having additional tenants.

The judges feel that the punishment is too severe.There is a current case in Butler county where a widow lost a $200,000 for a tax bill of $6.30. 

Breaking the lease is not illegal or punishable, in and of itself.And don't charge any non-refundable fees - they're not allowed. 

Getting a unit rent-ready is one thing;  however, there's no reason to punish others who need a rental now with avoidable delays just because the last tenant had to be evicted.

So, look for a solution, not a punishment, when you're dealing with an otherwise fantastic tenant.