The burden to prove that you or the tenant were negligent/liable in this loss would be 100% up to the person down stairs to prove in court. 

They are usually a one man band that will answer the phone when someone calls, but have no business systems, no employees, and will ruin each and every property through negligence, deferred maintenance, and poor tenant relations. 

The fact that they didn't notice that much continuous use on the city's end is pure negligence, especially after you and the tenant contacted them.  

A large portion of that is them underpricing it to begin with, and mismanaging some of the steps along the way.  32% over is gross negligence on their part.  

However, because this claim seems pretty small, and because there's no negligence by the unit owner above, I'm 99% sure your carrier will "not" subrogate against the upstairs owner/tenant. 

Repairing the toilet is your responsibility, but it's not due to negligence and you shouldn't have to share the water cost.

However, you can send the bill to the tenant and at least require them to pay half of it since it was their fault.when you include utilities in the rent, I recommend you have a clause that states they are responsible for any excess utility use due to negligence or abuse.

They just never mentioned it to me.That's negligent IMO.

This tenant is paying $3,450 a month for rent.Should we send her an invoice for a portion of this repair due to her negligence?

My main concern is not being able to receive the property permits to complete the basement renovations.If this property has been illegally renovated, what would be my options moving forward, in order to avoid the repercussions of this negligence after purchasing the property?