I’m a California landlord. And while some of our laws are a bit crazy, and the woman (tenant) in this case is definitely a grifter, this whole thing is completely the landlord's fault and it was completely foreseeable.
He rented out an illegal apartment that was built without permits and did not have a certificate of occupancy. That’s a recipe for self-destruction and that’s what he got. If you rent an illegal property to someone litigious or malicious, you might as well sign the deed over to them as they may end up owning the property.
The tenant is a scam artist for sure, but the property owner set himself up to be scammed and is a victim of his own greed. He knew the apartment was not permitted. As someone who follows the rules, I can’t get too upset about seeing bad things happen to people who don’t.
I also think anyone who rents property on sites like AirBnB is asking for trouble, as you basically lose your ability to vet the tenant before they move in. A little research on this woman would have quickly revealed the fact that she had pulled that stunt before.
This whole thing is a demonstration of why you need to obey the law and do good tenant screening.