It's a shame it came to this, though. Others are right, the letting agency/owner should have been more upfront. Now, as a result, they lose a tenant. What they did to you guys was quite unprofessional.
Also, I don't think Mort was having a go (forgive me Mort if I'm misinterpreting), I think everyone just goes about their own visa journey in a different way. The best way is to make sure all your "homework" is done before attending biometrics and submitting your docs.
The unlucky part in your case was that your fiance's landlord allowed him to believe that it wouldn't be an issue for you to live there with him, and then they ended up putting you both through the ringer. I don't fault either of you for that, but in hindsight, it may have been better to just re-schedule the biometrics appointment until you received word from your fiance about your housing options. This would have allowed you two weeks from the date you attended your biometrics appointment to get your docs to the consulate. Still, it's hard to evaluate whether or not something like that will fall through.
That being said, you DO still have time if you're able to convince his parents to help you out. (Someone correct me if I am wrong that they could fax this proof in the form of a signed letter and then mail her the original) Even if they can give you the permission and they understand it is only temporary, it doesn't mean you HAVE to stay with them until you're married. If you end up with them just a week and your fiance finds a suitable accomodation for the two of you, nothing is stopping you from then moving out and into a place with him.
The idea behind getting their permission is to allow you to at least submit your application and documents with proof of a place for you to stay that won't require you to be supported by benefit of public funds or otherwise cause you to overcrowd the property. Even better if you end up finding a place for yourselves in this time.