However those would have been fraud, what you’re talking about probably falls into the professional negligence category so a little different.

I also don't think it's a question of a lender getting 'creative' - you'd need either a negligent appraiser or underwriter to get this qualified as it presently stands.Solutions would to petition for a zoning variance OR revert back to an STR and take the cash flow hit in exchange for pulling out the equity. 

It's my highest priced rental but lowest in net the last 2 years because of their constant complaints, where most of it appears they caused it but I can't prove negligence.

That makes sense to me EXCEPT if the injury was the fault of the PM -- why should I have to indemnify (reimburse) the PM if their negligence caused the injury? 

OWNER agrees to promptly and diligently defend, at OWNER’S sole expense, any claim, legal action or other proceeding brought against AGENT arising from the management of PREMISES for any error of judgment, or for any mistake of fact or law, or for anything which AGENT may do or refrain from doing hereinafter, except in the case of AGENT’S willful misconduct and/or gross negligence.

I will spare you details like falling out of contract due to windows being inexplicably nailed shut, but for comedic relief I will highlight the pain culminating in complaints that there were random, free-roaming chickens pecking around our yard and putting off potential buyers due to a negligent neighbor.We ended up needing to take it up with the city to reign these fowls in, an action that caused the spiteful neighbor to tank a number of our other showings.The end result of all this was losing at least $30k (and probably more when it was all said and done), locking up the capital for ten months, and dealing with a two month long, stressful process of trying to sell and falling out of contract three times for various, silly reasons.

I asked them to pull the seconds as I wondered if we were going to see a resurgence of the old 80/10/10 (80% bank loan, 10% down, and 10% second) with people paying over appraised value but they said the numbers were negligible. 

But this is negligible, depending on the size, and it does go to zero when the REIT sells the asset.The more common issues are: an upreit, or any reit structure for that matter, blocks my ability to access losses, so if I am enjoying the recurring tax benefits or real estate, this structure no longer allows it.  

What else can landlords do to prove to the judge that we are not negligent ??

I've read through the the disclaimers, but feel this borders on negligence beyond what a standard home inspection should have found.Seems like there may be recourse, just not sure what others have encountered either against a home inspection or against a seller providing pictures of a fix which were cosmetic but still had underlying safety issues.