our house needs your advice and help

re: the illegality of the living arrangement - that shouldn't stop you from looking around for a lawyer for some expert legal advice from someone in the area. Most lawyers will advise you that your living situation is illegal, etc. etc. but they aren't going to call the cops and have you shut down.

If you are seriously considering buying the building yourself, however, you definitely need to talk to a lawyer and find out what kind of liability you're opening yourself up to. In some municipalities, single family homes cannot have more than one stove, for example, and a violation can carry a significant fine for the property owner. I'm not saying don't buy it (I wouldn't, but I have a higher aversion to that kind of risk) but at least do so knowing exactly what you're getting into.