We have a rental question?

My fiance and I are living at a located that he and his parents lived in for 13 years. Apparently the parents and the landlord never had any leasing agreement. As of January my fiance took over the rent and we paid the first payment of $725 in February. We have a joint account so I made the check out to the landlord and signed it. We gave the check to her and everything seemed fine. Then all of a sudden the landlord called my fiance out of the blue one day and said that it was unacceptable that I wrote out the check to her and that she isn't going to tolerate this **** and that she is going to raise the rent and we would have to sign a leasing agreement with her and that she refuse the money. We were fully awared that we would have to sign an agreement with her to make everything legal but after this debacle, I suggested to my fiance that we should look for a new place to live sooner. I find that the place is not livable, the roof use to leak and the roof was never repaired and I think it is moldy. Since, I've moved in with my fiance I've been sick, my sister came over for one day and she ended up getting sick. The sink area is rusty, the paint in the bathroom is peeling. So, my fiance and I looked for another place to rent. We found one, now the landlord never changed the check so we took the money and made a deposit for the new place. The right thing that we're going to do is pay her for Jan and Feb. I moved in Jan. What should we do, do you think she would sue us for giving her a bounced check eventhough the money was in the account waiting for the check to be cleared, she never deposited the money. What advice do you have?