What I'm understand here is when you bought the house, the extra room (studio) was already added on the before you bought it, but you knew there was no permit issued. They're probably coming over for the inspection, because of the shed you're building. Obviously one of your neighbors doesn't like the sight of it for some reason. They'll the placement of the shed, if sheds are allowed where you live. They're basically doing it, because a neighbor called and didn't like having to look at it out what ever window they look out of. They discuss the lack of permit with you when they get there. They could tell you to remove it or just move it to another location. Don't know if you'll get a fine right then and there or if you don't comply. You'll find that out soon enough. As for the added studio, I don't know, because I'm not sure if you built it or the former owners did. If the former owners build the extra room, and you knew of the "no permit" then that problem may be passed on to you. Is it stated anywhere in the paper work when you bought the house that there was "no permit" issued for the room addition, then don't say anything unless they have blueprints of the house when it was originally built and doesn't show the extra room. If you build the addition with out a permit they could go by the book, because there a laws about such things as you are aware. They could have you remove the room or what ever your city or township requires. You could get off with a fine if the room doesn't intervere with lot lines. I remember a case where I live. Guys boat house either burned down or he wanted to repair or rebuild another. Law had been passed, no more boat houses. This went on for three years ... back and forth to court .... he loosing thousen's of dollars in court costs all the while rebuilding his boad house. I guess he thought he would win the case. He lost the case and had to tear down the new boat house he insisted on rebuilding. All I can say at this point is laws or laws. Get a permit next time.