For example, I can't give referral fees to non-lawyers for bringing me clients because I can't have a controlled business arrangement with non-lawyers. 

I'll message you to arrange a time & date.

.:1) I can keep the rent close to what they are paying now, and they will have to vacate the basement area for construction to commence.2) They can keep their current arrangement, but rent will be raised to a competitive level.3) They can vacate - this being their 30 day notice.Do you all think this is a fair and smart approach?

The arrangement just needs to be fair on all sides, and there needs to be transparency and accountability.

If you can get away with it from a loan standpoint, the promissory note will be a better arrangement if you're paying this person a fixed return.

I do not know all of the details of your arrangement and I am not giving legal advice. 

It's when you use rent credits that have some kind of rent credit applied towards the purchase price then you run into a financing arrangement which involves owner financing.

Even if they dont need the money, then they have to be comfortable with the arrangement. 

There is no one way to approach this arrangement and it would be best if you and him hash out these details and decide how to align both of your goals.

Send me a private message there and we can arrange the details.