You go to Riften and tell Grelod you must speak with her in private, she'll walk back to her room and you tell Grelod her life is in danger and she can not stay in Riften. Instead of starting the first Dark Brotherhood quest you will start an alternate quest to warn Grelod that she is in danger and should leave. He then offers you his family hierloom anyway. You'll have the option to tell him that you won't kill Grelod.
You go to Aventus Aretino and he responds as usual mistaking you for a DB agent.
