Translation:The sofa is in the living room, next to the armchair.
I thought your answer clarified it, until I looked at the Hungarian Ikea site. Lots of kanapé, also lots of kanapéágy, even fotelágy, but no heverő?!? http://www.ikea.com/hu/hu/catalog/categories/departments/living_room/10663/
A kanapé a nappaliban a fotel mellett van.
I guess you want to know if you can interpret the given sentence as "the sofa in the living room", no? Not really. If you leave van behind nappaliban, you're putting focus on that one sofa, but what other sofa is supposed to be next to the armchair (which apparently is in the living room in this case) than the one that's in the living room, too?
You could also create a sub-clause if you want to make it really unambiguous: "A kanapé, amely a nappaliban van, a fotel mellett van." But that's a mouthful. :)
Fotel is based on French fauteuil. I also believe a outdated way of writing is fotöly, which comes i assume closer to the French pronunciation.
Or simply karosszék which literally means armchair (what fotel did not originally mean, since it was once upon a time a folding chair...)
The Arcanum lexicon notes that the spelling variant is fotőj, so you're pretty close. :)
A fotel is something different than a karosszék, even though both translate to "armchair" in English. While a karosszék is just a chair with armrests, a fotel is cushioned, more like a single-person couch.