They will yell and make all kinds of ominous threats about legal action, but if they are not legitimate, they don't want the scrutiny of a judge, so they'll just fade away.  

One threat of legal action (even subtle ones) and I start carefully trying to figure out a legal way to get rid of the tenants and that letter has a bunch of them.

@Mike Bolen, our biggest threat is probably from the political realm... many jursidictions are considering legislation restricting STR's...

If she's not paying the current rate and you can't kick her out, not paying a higher rate isn't going to change anything.Here's the truth: she doesn't see you as a threat and is going to kick this can down the road until you become a threat of she finds something different to do.

That being said, I would begin by contacting your title insurance company and ask the title officer or advisory title officer what they ideally require.Solving these type problems in my state has made me several fortunes so I cannot say enough positive encouragement to learn how to solve these type issues.Title insurance wants to sell a policy but have zero risk from other claimants to title or creditors whose threats could result in a loss to the insurer. 

Regarding staying out of trouble, my simple rule is to follow the rules/laws, be nice, be respectful, and never use threats or coercion of any kind. 

(Or at least, the THREAT hovers)?

On the other hand, our section 8 experience in south central WI is that the sec 8 tenants are used to being offered "cash for keys" from the landlord to avoid eviction, and as such, don't take the threat of eviction seriously, but that is due to the many "slumlords" and larger issue of bad management with the local landlords.

The notice comes with 0.5% monthly interest and the following threat: "Failure to pay will result in the cost becoming a tax lien against the property or a personal debt turned over to a collection agency."  

  -  Households with children twice as likely to face an eviction threat, regardless of marital status- the Map of the eviction rates across the country- Their conclusion is 20% of renters struggle to pay rent.