You are not seeking help or assistance. You are seeking free technical and legal advice on a real estate matter involving large expenditure. I believe you are over-reaching what this online forum is intended to provide.
You can contact the Building Dept. and they may be willing to assist you. However, that may expose you to additional unforeseen risk.
I suggest you seek professional counsel in this matter. Either from an attorney or HI experienced in handling occupancy, zoning and construction matters.
Such services cost money. A professionals training and education does not come free. The cost will no doubt be relatively small in relation to a) the potential problems avoided and b) the 50-75K you will most likely spend on such a rehab.

__________________
Accurate Inspections & Consulting, Inc.
773/844-4AIC
Markus Keller