Definitely go the legal route here, don't rent out the basement unless you have the OK from the relevant authorities--it's regulated for a reason (fire safety, carbon monoxide poisoning, etc.) and your insurance will not have your back if something goes wrong.

The closest I've come to your situation is similar to one in which a tenant wanted to cut the grass, for which he wanted to get a reduction in his rent.

Operations- tenants refusals, either cull them before they get to you by requiring autopay as an example, document on their application why you refused them, make sure your facilities are maintained properly and no safety hazards exist, etcLLC.

I would mention to them this is not going to cut it in the real world facing an attacker.

Should we sell the property when we leave and cut our losses?

Prime is currently 7.75% and likely to drop by 1-3% during this fed cut cycle over the next 1-3 years.  

Gov. mandates, laws, regulations, these are tools to control WHAT the product/service is, think safety focused. mandating no lead in toys, or fall-arrest gear for roofers, things like that, THAT is where it works. 

Or she just cuts you out of the deal somehow and doesn't give you a penny and she's dating a mixed martial artist bouncer now so what are you gonna do, etc.

My questions are:- is it worth investing there in terms of the safety of tenants?

They also will recommend “lenders”, “banks” “closers” “agents” and title company who they 100% are getting cuts from AND EVEN OWN without disclosing that information.