Many ignore the issue and have no intention of operating morally and ethically.

I want to do things, morally, ethically, and legally right.  

In the US we are on a high consumption diet.

Moral of the story-- I vote buy the investment property.

You are in violation of at least half a dozend rules plus there are moral and ethical issues.

Does anyone have any morality feelings about gentrification that interfere with an ideal purchase?

I would be careful about bumping the rent to include these services; tenants can get real careless with water consumption if they are essentially getting all they want for a fixed price. 

This evil bastard has a faulty moral compass and has decided to steal from the "rich" (you) and give to the "poor" (himself) by squatting on the premises under the guise of a non-existent or forged lease.Where I in your position, I'd find a FLAT RATE eviction attorney that has experience with these kinds of cases as soon as humanly possible.

Any advice or just moral support is always very much appreciated!

Well, if I didn't have to worry about money, I could further my other pursuits (become a financial adviser, build a financial business focused around helping those in crisis, and a little bit of rubbing it in every person's face that has told me I can't do it).I'm still wrestling with this moral dilemma, but one day I'll have it sorted out and could give a more concrete answer.