I’ve seen too many new builds stall because no one spotted the red tape early.

Any advice on how to navigate this while keeping the deal intact or potential transfer of partners would be greatly appreciated!

Their permit will not be transferable when they sell though, according to the draft plan.

You can later transfer the property to the LLC, but be aware it might trigger due-on-sale clauses or additional costs.

Were the transfers from the tenant credit card or ACH transactions. 

One key factor to confirm is whether the STR permit is transferable, as regulations can change.

Here are a couple of ways you could structure the deal:Lease Option with Seller Financing: You could lease the property with an option to buy later, allowing you to rehab it while giving the sellers time to find a 1031 replacement property.Seller Financing with Deferred Payment: Structure the seller financing with no immediate payments, allowing you to refinance once the property is appraised, and the sellers can complete the 1031 exchange when ready.Escrow Holdback: Transfer the deed into an escrow account, giving you control without immediate transfer, so the sellers can take their time with the 1031.Third-Party Facilitation: Use a qualified intermediary to hold funds and facilitate the 1031 exchange while you refinance.These options allow flexibility for both you and the sellers.

Is there anything they can do to keep you from transferring your assets to another custodian or is it already too late?  

If it's a QM you won't be able to close in a business entity like a LLC, although in some cases you can transfer into an LLC after closing.

Many insurance policies also require re-development within two years, a near impossible timeline in a region with the coastal commission, perhaps only second to Manhattan in terms of permitting and red tape.