No local DNS resolve after enabling DHCP (help for a newbie on DHCP/DNS)

At first I was using pihole as adblocker and dns server for local addresses and everything was working fine; I could resolve local domain names perfectly (for example mylocaldevice.lan).
After enabling DHCP service which still works fine, I can no longer resolve local domain names.
On the router I disabled DHCP server for IPv4 and IPv6.

Installed on a fresh raspberry pi OS bullseye

My debug token is