Your picture of the newspaper reminds me that in an older house (not as old at the 1901 house) we found lots of old newspapers used as insulation. 

There are ways to insulate yourself from bad actors and as time goes by we have fewer and fewer issues. 

Any HVAC ducting should be insulation wrapped according to the climate, and ensure exposed floor insulation is secured in place(ie.

The other reason may be that zoning did not allow for the additional unit when built.When I looked into finishing this area in about 2016, (this is city of Burien, not seattle btw)  the sticking points were that they wanted the entire building retrofitted for current insulation standards and firewall ratings and addition of sprinkler system.   

My accountant claims there is no tax benefit to an LLC, but there is a need to insulate oneself from liability.