I repeatedly told them that the contract does not say such things and that even if the contract says so (which it does not), it is a violation of Georgia Real Estate Law to use Escrow money for any purpose other than damages when a resident moves out of a rental space.  

Also, go through your lease line by line and look for things that you could use to evict based on violations.  

Any such disqualification could violate ADA.

Some judges may frown on a landlord for violating this provision.

Also, check for local landlord tenant laws to ensure your not violating anything. 

(She accused me of having a rooming house, violating the law, when I don't.)  

You will be in violation of the contract and they can cancel it and you will lose your EMD. 

Thats a violation if so, Or the adjacent property is in the IRA?

I am mostly interested in mechanics on how to "apply" the rent payments towards the price ...legally This hypothetical is loaded with predatory dealing, tax issues, tax violation, a non-compliant finance agreement (if they don't qualify) and incorrect assumptions about an option.Hints:Tenants in a residential cannot maintain the property, or under any option.You can seller finance 100% of  the purchase price, your example will hit you with imputed tax rates for interest.Selling a 45K residence for 20K more is purely predatory dealing !

I went to my county and got a print out of code violators, tax delinquent properties, and absentee owners.