This business is full of surprises and instead of playing the blame game confront the problem and correct it.

If the tenant is right - confront the seller.

My advice with lower class properties though is that you have to be unafraid of confrontation and be very firm with your tenants. 

I'm not a confrontational person and I'd rather deal with knowing a project is being bid a couple extra days and knowing it will be done by then.

Part of me almost wanna give in and let her renew to avoid future confrontations.

I'm good here, wasn't me, thanks for asking Greg :)    I don't get confrontational with tenants.... the news reported the landlord today was supposedly there about a rent dispute.   

I use TenantBackgroundSearch.com.....get the full report $29.95I disagree...get social security number, get DL number, get as much information as possible(or legal in your state) because it is much less likely for people to lie/cheat you and have all that false or fraudulent information to do it with, AND if they did, they are already guilty of several felonies that would probably make them a bit less confrontational, if things go sideways.

To avoid a confrontation they need to be mentally prepared.

Then, after confronting them, it turns out to be bogus, I don't see that the bank has a fudiciary responsibility to tenants as a lender as they only have a collateral interest and rights to offset the loan with rents.

Managing your own construction projects will inevtiably land you in personal confrontations.