But also consider the legal limitations/costs in each market. 

There are restrictions on the amount that you can sell a home for above purchase price with an FHA loan. 

Pretty sure they will not go quietly into the night since they have learned how to legally work the system.

Do not rely on it for legal advice.

There are certain benefits of starting an LLC (legal protection of your assets, with a proper structure - some tax savings, etc.), but there are also costs and time required, so I would advice to start as a partnership, and form an LLC if you decide to keep doing it on a regular basis.

As far as finding out who the city planner is to discuss the legal aspects of that is it just as easy as googling city planner of city "x" or is their a specific site you would recommend?

I then sent the photos to Clayton to give him a heads-up about the extensive work still needed to be done and he again assured that the work could get underway once his crew "have legal ability to get into he house, we'll address the remaining items that need fixing and get it done."

He want's to score by flipping something to you that he neither owns nor has legally tied-up.

But, I'm looking for advice on how to give them a non-renewal notice in a proper legal fashion to mitigate any issues after they move out. 1.

You probably don't do your own legal, accounting, plumbing, etc. so why on maybe the largest transactions of your life ever try to do it yourself.