Ultimately, I wouldn't incur court costs if I'm getting my money.  

The declarations are vary vague about landscape requirements "lawns will be maintained to the standard of the community."  

If he takes you to court they will ask you to settle with him anyway.If he did not have your home address he would have proceeded to court  so you are better off this way.  

Spend the few hundred dollars now on a contract you can trust from a professional which will likely save you a lot of money in the long run if you end up in court somehow.

I want you to pay me to represent you in court, but have no experience in representing anyone in court.  

I can't see any court upholding the labor swap, but there is a financial value placed on that labor and that illustrates what the rent amount was intended to be, ethically or not. 

The LL can always say that they informed your sister and she first said she was only dog sitting, then the next month she denied it, then the third month the LL saw the dogs the LL served the notice.I believe the above to be a very reasonable scenario and a court will understand and believe, so the big question is...what is on the lease ?

You are actively getting the damage repaired, so your tenants can't just refuse to pay rent.And even if they were, I'm fairly certain they'd have to file something with court and pay the rent to a court escrow account.

We will need a few tax court cases to have a better idea of what's expected.

Technically their insurance does you little good unless they get a declaration (or whatever the agents call it) from their agent specifying your property address and you/your company.