You tell her the truth. That is it not appropriate etc. and that many people seem "nice" but they are not. And because you are her Mom, you know and are protecting her.
Tell her, not graphically, but the truth.
That is what I do with my kids.
You tell her, she cannot sleep over.
Or, Grandma can come over and have a sleep over with her... at YOUR house.
That might be a good option/compromise, for your daughter.
And, I would also, wonder what that man's background check would be... if you do research????
Go with your gut instinct and your inner radar.
My "problem" with this would be, not that Grandma has a guy living in her house and is not married... but... about whether this Man... is a Pedophile/molester/criminal????
THAT is the problem and concern here.
And in addition to, the issue that he is a freeloading drunk and very manipulative... and that, the WHOLE family has a consensus on that.
SO... do not let your daughter sleep over there, NOR be alone with Grandma and that Man at anytime. Because, you don't know what Grandma's supervision quality would be. Even if just visiting at her house or IF... Grandma is babysitting.
I would not let my kid, be in that man's presence, without, me.