It would be unlawful to carry on a casual arrangement of cash in hand over this length of time, but it undoubtedly happens. She did have an employment contract.
ACAS would be the best people to help unravel this at this late stage, but on the evidence thus far the outgoing landlady had a legal duty under TUPE to consult and it appears she failed to do this.
At this late stage, ACAS may well conclude she seems to have been dismissed without notice, unfairly. Getting a job back off the new owner is unlikely, and the best outcome would be money for unfair dismissal.