I would say that it is not a large amount of space and does create a cozy situation. Unfortunately, sometimes this is the only way to use our small spaces without costing us more to replace existing furnishings. If it works for you and you are fine with it, there are no set rules. It is what works for you when you weigh your pros and cons.

Does the sofa only have one arm and that puts the love seat arm over the armless end?

Photos would be helpful.