Not sure what province you are in but it seems like this is a misinterpretation of the written guidelines.
I don't see why one can't have a home daycare in a suite within a house. But I can see the written guidelines saying something about not allowing a home daycare in a suite of a house that also has a home daycare (it's one home daycare per roof). Something like that.
I would find the written policies and ensure you are interpreting it correctly before closing your business.
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