Just asking hypothetically of course. Suppose you own a Bi Level two story house but you are having hard time finding good renters for the whole house. And suppose you found 2 families who you really like and who like the house but cannot afford the rent.

Would it be possible to give each family one floor of the house? Suppose they both agreed to sharing the house and they each had a separate entrance.

Is this illegal or a violation? If it was, what is the worst that could happen to you if you were an NJ landlord an one of the tenants later had a disagreement with you and decided to inform the Man. 

I wouldn't know all of the local regulations. Generally speaking, rules disallow more than 2 or 3 unrelated people living together. There's other rules that regulates the number of tenants based on the bedroom count. But local towns don't have enforcement units and rely on neighbor complaints.

Other than that, the only other issue is parking. In suburban neighborhoods, neighbors object to you parking in legal parking spaces in front of their homes, even if you point out, yell till you're blue in the face, it's a public street. If lets say you have 8 adults living there each with there own car, and your SFR only have space for 4, 4 of your tenants would have to park in front of other people's homes. Then the neighbors would find all kinds of violations to report you to the town, on rules that you never heard of.

I have a SFR and the current tenant is a family with 4 cars, and I warned them to be careful of parking in front of other peoples homes, especially when they have visitors, and don't get into arguments its a public street. I tell them the neighbors don't care what you do, and won't bother you unless they see your car in front of their house. My tenant moved in from NYC this is news to them. Fortunately my corner property can accommodate up to 6-8 cars.

My former tenant had a neighbor whose landlord rents to a family and extra rooms to two others, violating rules against the number of unrelated people. His tenants park in front of my rental. He complained to the owner who pointed out it's a public street. My tenant told him public street or not, I'll report you to the town you're violating town ordinance against unrelated people living there. Other than that, I don't care what you do. The tenants across the street never parked in front of my rental again.