Code enforcement , need help BP!!

[Carolina Bettencourt]

Hi BP,

Found out today while filing for permits for a garage door replacement on our recently purchased SFR here in Southern CA. that the shed we build didn't comply with setbacks and the city wants to do a code inspection in 2 days due to suspicion of us trying to rent a 720sqft permitted addition in the rear of the home built before we purchased.

Their suspicions are accurate and just this week signed a lease renting it for $1400 a mo..The house was a fixer and the addition was being utilized as a "Granny Flat" with a unpermitted kitchenette. Like we did with the rest of the house we spent serious money renovating and improving the addition,   with the intentions to rent it as a separate unit with separate entrance while we lived in the original 3/2 floor plan.

Where the issues lies, the kitchen in the granny flat is unpermitted the lot is zoned for SFR, there is a handful of other unpermitted, not to current code or plan issues throughout the 60 y.o. house, mostly before the purchased the home.

I understand we made a fair number of mistakes and assumed significant risk with the purchase, my questions are,

- Where do we go from here and how do we interact with the very small city who knows us by name?

- Is renting this addition out of the question for ever?

- How worried should i be, can they really make us change/ permit any deviations from the 1956 drawings?

- Do i be nice and complicet or lawyer up? 

- What should i do/ undo to prepare for the inspection?

* Note: money and time are tight, we have a new born and my husband is active duty military and deploys in March...

Any advise is much appreciated.