Landlord fussiness and no lease

We have been living in the basement half of a split level home for nearly a year. There is no lease, and nothing was signed at the time we interviewed for the apartment. The house is owned by the people next door, and the couple upstairs are son and daughter-in-law of the owners, and they are acting as property managers. We have always gotten along, sharing excess food between the two couples and enjoying our individual gardening around the property.

Recently the lady upstairs has come to us and told us we are not "neat enough" and that we had two weeks to get our apartment cleaner than it is. We are not pigs, but we admit to being procrastinators when it comes to putting things away. The apartment gets throughly cleaned once a week.

Upstairs people occasionally have to come into our apartment to reset the circuit breaker, which is in the second bedroom. This second bedroom we have treated as our "storeroom" and consequently it had accumulated a lot of boxes and "stuff." This is what started the whole dialogue about being messy.

We have been told that if they have a choice between having "nice and friendly" and "neat" for downstairs tenants, they will opt for "neat," and we have been told that they can get new people in here with no trouble.

Of course there is a bit more to the story, as in more examples, but we feel now that we are being treated like children (I am in my fifties, my partner is in his 30's) and that we now have lost the right to live as comfortably as we would like to live in what we considered was "our home." We prefer a more "country" decorating scheme, while upstairs lady prefers House Beautiful. Her house always looks perfect, while ours looks lived-in and homey. To quote, "You need to keep this area as clean and neat as I keep mine upstairs." I suspect that this is an illegal rental unit, but I don't want to create a bigger problem that will blow up in our faces.

Suggestions?