Buy a house and own use or rent

As far as I understood, the woman doesn't have a lease agreement so far. That means the saying "purchase does not break lease" doesn't apply here at all. The woman must move out upon sale because she is living in the house without authorization. It would only be problematic if she suddenly conjures up a lease agreement out of nowhere. Demanding rent will not work for the reasons mentioned. The woman can conclude a lease agreement for the 120 sqm, but it will not be "approved by the authorities," so she would only receive the local comparable rent for a 60 sqm apartment (2 persons). That would probably be quite low, perhaps around 300 euros (cold rent), and far below what could be demanded for the house. Initially, I would clarify the legal framework conditions, i.e., whether she now has a lease agreement or not. The owner would have to declare this bindingly. Everything else depends on that, and honestly: I would refrain from it. Aside from the legal aspects, there are also plenty of human issues involved. Buy only when the house is free. That may sound a bit "brutal," but that's not because I can't empathize with the situation of the "remaining family," as exactly the same thing happened to me, and precisely as described.

Whether a tenancy exists or not can certainly be determined. A written contract is not a necessary prerequisite for this. At the latest, when rent is demanded and paid, a tenancy also exists (INAL).