I always document conversations in writing for evidence "just in case"....in this case Id pick up the phone or stop by.

While I don't want to give them evidence that could be used against me, at the same time I figure this is likely to head off a dispute and even if not, it's the same evidence I'd present in court anyways.So include the images or no?

I sent the pics of damages  1) because logically as I explained it will likely reduce the likelihood they complain and 2) I will have to present the evidence in court anyways.

Show them the evidence of their mistake and (politely) demand they remove the charges by (DATE).

; if so, they have to pay 25%-50% towards rent or mortgage4) can they provide evidence that if evicted, they will become homeless?

It’s evident that your tenant is taking advantage of the situation and looking to squeak away without paying rent that is justifiably due to you.

You have to renew a month-to-month tenant unless he/she does something they're not supposed to and you need to document this and collect evidence. 

At this point check your lease closely and gather evidence.

@Justin Tahilramani thanks, my agent didnt see evidence of cracking in the inside walls.

@Nathan McDonaldI agree with @Dan Vleck since you don’t have a move in check sheet you don’t have any evidence of what the condition of the unit was when they moved in.