chowhound,
That's a pretty good summary of what occurs in the US except that: (1) the owner will usually seek what is called a "variance" from the local zoning board. A variance is a non-conforming use that is not legal but is nevertheless allowed if there is an appropriate showing of hardship; (2) the City will issue what is called a "cease and desist" letter before going to Court, and if they go to Court it will be because the cease and desist letter has been ignored.
I have a very good friend who is a municipal attorney and he is involved in exactly these kinds of issues. Usually, the best advice that can be given is to try and work something out that is acceptable to both sides without incurring huge fees, fines and potentially large attorney's fees. Unfortunately in many instances the building owner gets overly emotional over the issue, the emotionality takes over reason and rationality, and the proper communication that should have been made was not made, resulting in attorneys getting involved. I would estimate that 80% or more of the money I make is from clients who have failed to communicate properly and avail themselves of alternatives to litigation in resolving disputes.
Of course, it does happen that a client will try to communicate with the zoning enforcement officer, and the zoning enforcement officer will take a position that is objectively unreasonable and demands being taken to Court. In those situations, depending on the amount of money at stake, attorney involvement and litigation are inevitable.
JP, if the City will never notice this nonconforming use it may be worth taking a risk. If you are not a guy who likes to roll the dice in this fashion, reach out to the ZEO and see what the fees are for a permit without telling him about the nonconforming use. Play dumb. Then reassess your situation once you know what kind of money will be involved in conforming the use. Good luck.