It was illegal, and they made the decision to do it. Anything that follows that gets little sympathy from me; I believe that people should own the consequences of their actions in situations like that. Your illegal tenant refuses to pay you rent, leaving you with no legal recourse? Cry me a river.

And make no bones about it, it wasn't a sense of charity that made them decide to let her stay. They were charging her rent (and in fact, attempted to raise it at least once).