Give him his money back unless the place is actually damaged.

Highly unlikely, since in no likely scenario would  there be any "award" of damages to the unit owners for the attorney to take his cut from.  

If anything happens to you to damage your personal credit, you will still have an option to get funding.

Usually it also says they would be responsible for damage they cause, so in theory this would be his responsibility to pay.

May look back on this very post in 5 years and laugh cause you were right! 

He is dealing with an out of town and possibly out of country owner.Check my understanding on how I think I could structure a subject to and the obstacle of this property.2 home property1st is 2bd 1 ba needs paint, carpet, and bathroom remodel, and cosmetics Rent would be about $850-$9502nd home is uninhabitable (fire damage). 3 bed 1 bath.

Now that you've made us curious - what exactly caused the odor?

You might consider a larger deposit and state in the lease that minor maintenance issues and repairs needed due to being damaged are the company's responsibility.  

Its hard to know the ROI because its unlikely if a tenant likes the rest of the house they will not rent it because of this, but also I want this to be a house they enjoy and not have a frustration like this everyday causing them to want to move out sooner.

The capital owning class always is the biggest beneficiary of asset inflation caused by the fed.