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While I sympathize with you and your friend and hope she gets the help and protection she needs, the bottom line is....in an illegal apartment, you really don't hold any cards that can help you now. You may get her LL shut down but that does not help you.
I'm not a lawyer, but I'd say that without a lease stipulating her ridiculous request that the landlord doesn't have a leg to stand on. Her tenant, your friend, has every right to have visitors as long as those visitors are not breaking any laws or ordinances. Furthermore, the demand that you notify her in advance of your visit implies that she is hiding something illegal such as elder abuse. The fact that the owner occupies the home doesn't give her any different rights over her tenant unless they are stipulated and agreed to in writing. She can try to raise the rent and threaten to evict your friend but what are her grounds? Without a lease she can't argue that your friend isn't meeting the agreement because there is none. And your friend's current tenancy gives your friend rights even without the lease, so the landlord is the one who has a lot to prove in court.
You could do your friend a service if you could find her a better place to live. While it would take many months for the landlord to legally evict your friend, even from an illegal apartment, if the city decides to close down the illegal rental then your friend would be out on the street very quickly. The landlord would face a fine, but that doesn't help your friend. Medicare does have some aging in place options that could possibly help her stay at home, but I doubt they would be willing to work with what sounds like an illegal apartment. Until she does have a better living arrangement, a visit to an attorney might be worth the $200 to get the landlord to shut the hell up. Because your friend is so elderly, it is possibly you might be able to find some free legal services to help her out.
At this point, Adult Protective Services should get involved. She obviously can't take care of herself, and can't make safe medical decisions on her own. It shouldn't be up to her anymore whether an ambulance is called. If she can't walk and is "crawling" around her house and sleeping on the floor, I have to assume she is also not "utilizing the bathroom" nor eating correctly. 9-1-1 should be called and she should be taken to a hospital. She will most likely then be moved to a Nursing Home/Rehab facility where they can either get her fit to return to the community or have her live permanently (Which will be covered by Medicaid).
You enabling her in that apartment is doing more harm than good at this point. Do the right thing and get her to the hospital ASAP. She could have had a blood clot or a stroke which has rendered her unable to walk anymore. She could die before you get the Landlord situation rectified.
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