you are getting mixed up with air transport regulation and private airworthiness.
If the machine is used commercially buy a business then at 12 years the engine must have an overhaul and be recertified .
However if the machine is not used commercially its service life becomes "on condition" ie it can remain in service so long as it performs correctly, passes inspection and any faults can be rectified.
in this instance a flight school can not operate a machine that is not air transport.
Once the engine is overhauled it has another 12 year commercial life.
A zero time piston engine may have few components left from its previous life.