YES! Absolutely reasonable. There is no right to live exactly where you want for the rest of your life (especially when where you want to live is an illegal residence). Nor should there be.
noun: Part of a set of laws that I do not like.
Rent control does not give you the right to live in an area for a given amount of rent in any circumstance. The circumstances in which it does not provide assurances are not "loopholes".
New owner decides he's tired and wants her out. If he suddenly claims the room to be an "inlaw apartment", then it would be illegal. Now he can start the process to evict.
Legal loophole.
[Update] The timing is suspicious too, since these units could be legal soon:
http://www.sfgate.com/default/article/S-F-in-law-units-law-c...
If anyone found a loophole here it's the tenant.
Basically the moral center of our brain, by default, views her leaving as a choice, and you moving as a choice. Rather than her staying vs leaving as a choice. Looks dumb when you parse it right, feels right when you parse it wrong.
Wanting something is not the same as deserving something.
The rental laws seem to be very restrictive over there. Here in Australia you are often given a one year contract which can then go to month to month with a months eviction warning if not renewed into a longer contract. If it was me I would just be happy that I had a good thing going for as long as I did. Essentially the uncertainty is already priced in to the rental price, it is well below market value.
Note: comments to the effect that buying property is a big risky deal should pause and consider what that statement imputes about what the landlord offering the place for rent happens to bring to the table