It breaks the IRS rules and constitutes mortgage fraud.So, the tax-reduction game is to have rental properties that cash flow and then have enough depreciation deduction to erase all the cash flow and create deductible losses.

All parties agree that termination of this agreement without prior notice before December 2019 will constitute breach of the tenancy as agree on Page 1, and all security deposits shall be forfeited in favor of the Owner as full Liquidated damages at Owner's option following termination without notice"So.. what are my options?

All of these things are legal and constitute good advice frequently given here at BP.

The following constitute grounds upon which Landlord will be basing the decision to lease the Property to you.

Bedrooms shall not constitute the only means of access to other bedrooms or habitable spaces and shall not serve as the only means of egress from other habitable spaces.

Do either of you have any idea what constitutes "directly to the public"?

The Franchise Tax Board (CA's state tax agency) takes a broad view of what constitutes "doing business" in CA. 

More importantly, municipal water consumers have certain constitutional rights which municipal water suppliers, as governmental entities, may not take away."

The basic law on this is that the U.S. and Pennsylvania Constitution has a Due Process Clause that provides owners with certain rights.

If so, then your self-directed IRA cannot be used in any way to participate in the purchase transaction as that would constitute self-dealing.If the IRA is purchasing the home purely as an IRA investment, then the loan must be non-recourse, meaning no personal guarantee from you.