You can control the investor's ability to exercise the option... placing "not exercisable before" type language in the document.Options are advantageous over JV to avoid partner disagreements. 

In many instances like this one - by the time it gets investigated damage is already done I love these articles not for the fact investors are getting abused.. but the statements about lavish lifestyle  fancy dinners etc etc.. every single white collar litigation or criminal complaint has that exact same language.. and now you know why the Mafia guys just lived in some plain Jane home and maybe drove a caddy and ate at a low end restaurant LOL.  

The language on the IRS site is not controlling anything and is usually confusing and sometimes outright wrong. 

I would imagine any final version of drawings in you posession  will contain language similar to what I am including below:

Even if they catch the same thing, like Russel says, the difference in language/description/DANGER  can blow you away.

In terms of mortgage fraud, I'm not a lender or lawyer but the language typically says that you got this loan with the "intent" to move in.

It’s the first thing potential buyers will read, and it can make or break their decision to schedule a viewing.To write a compelling property description, follow these tips:Start with a hook that grabs the reader’s attentionUse descriptive language to paint a picture of the propertyHighlight the unique features and selling pointsUse bullet points to break up the text and make it easy to readRemember, your property description should be concise, engaging, and informative.

You're speaking my language ; ) We've been buying and renovating properties that have ADU potential for quite a few years now and about a year and a half ago converted one of those ADUs to an MTR and it is working out great.

I have a fully executed version of the lease with both of our signatures, so the basement language is enforceable in my opinion. 

I pointed out the language in the policy and the carrier rep still said it would be covered but would not put that in writing so the tenant had to find a different carrier.