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Good for her.
I'd also tell them to fuck off. The only reasonable option would be giving her the house (which she is now paying taxes on and requires work to make it usable because of the shit) or to bulldoze the thing (or uproot the house and move it; whatever gets it off the property) and get the lot back to its prior state.
The developer knows they fucked up and are hoping one of the people they are suing is poor enough or dumb enough to cave so they can recoup some of the massive legal cost they are looking at. Also suing the kids of a dead person is a little fucked up. Like "Hey sorry that your dad died but we can't sue him so we'll sue you instead."
No need. The house is already hers if the laws over there work as they do where I live. Anything somebody else builds on your land becomes your ownership automatically. The developer knows this and tries to bully and cajole her into getting his money back or at least cut some of the losses.
There's a quote from the realator involved to the effect of "we need to resolve this". Notice the language technically is just saying we'll work this out, but it's worded with the implication that it's on her to make good. Which, no, it isn't.
Her correct response would be "my lawyer will be in touch", and looks like she did that. I don't know if this is going to get her into Fuck You Money or not, but either way, she seems to be smart enough to let her lawyer do the talking.
It's probably similar in Hawai'i but don't underestimate the power of money to fuck over the little guy.