Basically, the city wants your side of the duplex to be inhabited by just you and your family (one family unit), so it's okay to add independent access to the basement as long as long as that isn't basically creating a front door for another separate unit. 

I don't want to go into the full list here for the purposes of privacy but let's just say that apart from property violations, the tenant is also violating the pet policy and having multiple inhabitants residing in the house.I am in talks with an attorney who suggests that we start with a 3 day cure or quit. 

A rental property is placed into service on the first date that both of the following occur simultaneously: (1) the rental is advertised, or held out as, available for rent, and (2) the rental is in habitable condition and ready for occupancy.Something to examine with your tax professional.

Then they broke something and claim inhabitable.

If you got a conventional loan to purchase a fixer that needs money to make inhabitable then you have ALREADY achieved a unicorn that a LOT of investors are looking for.

As long as my intention is to, "inhabit the property for one year" if I move before that what are the potential consequences? 

I did some googling and found this document: https://www.mass.gov/files/doc...quoted "ceiling heights in habitable basement, including drop ceilings, shall be a minimum of six feet eight inches".

I then await being sued for wrongfully evicting these people, and letting a jury start the end of this wave of injustice that has went on for far too long.As it is, There needs to be a suit brought against the inhabitants, requiring their removal and a restitution for damages and then punitive damages. 

The property has two homes, and we will be inhabiting the homes separately. 

It was inhabited at the time by a family member of the seller and kept pretty clean.