As a Realtor I am not a property management expert and therefore this is merely an opinion. Due to the nature, duration and extent of the situation you outlined above, I would seek legal counsel specializing in this area if you are unable to remedy the situation between the parties. My experience is that you can typically get a "free consultation" by a legal expert, however this may not always be the case so you should inquire prior to engaging anyone in this capacity.
Be warned, if your converted garage is was not built to code with a permit and there is any violation, you may also be open up to other liabilities or possibly "red-tagged" by the city for the conversion.
Again, an attorney is strongly advised, as the law sides with consumers/tenants.
Having a troublesome tenant is not fun. as a Real Estate Broker /property manager and Landlord for almost 30 years, I have had my share of bad tenants.
From your description. My best advice is to get help from an eviction Attorney. Most go smooth however some can be a challenge.. if you need names for eviction attorney's feel free to give me a call. My best advice Screen your Tenants carefully. and use your head instead of your heart. Being a Landlord is a business.
Jorge E. GosÃ¡lvez
Serving Clients since 1981
Broker Associate, GRI, SRES | DRE: 00811940
INTERO Real Estate Services
10275 N. De Anza Blvd. | Cupertino, CA 95014
(408) 249-3718 Direct | (408) 904-5465 Fax
Jorge@BrokersForLife.com | http://www.BrokersForLife.com