Go visit your top one or two picks, look them in the eye, tour the town and see some props first-hand.

Active involvement or passive?

So he is very involved and is responsive to the phone calls or emails. 

I going to guess there was a trust involved.

Well I don't know if "sorting anything out" with the owner is necessarily required...you can just state to everyone involved that the PM agreement currently in place will be terminated upon sale of the property.

"Habitability" is in the eye of the beholder.

Can anyone offer any advice on lease structure and insurance requirements to get this started off on the right foot to allow for a win-win for all involved?

So trying to collect the $15.00 nuisance fine would open up a whole can of worms.And a year ago, the city here introduced recycling food scraps, involving another can.

If anyone else had access to the basement at any time , that gives reasonable doubt in the eyes of the law . 

It kept him involved and committed because he had money coming when we sold the property.