The best area to find out the exact procedure of "reconverting" or "legalizing" the garage conversion is with the city. Sometimes, there is "grandfathering" and they even tax the property as if the house was built without a garage. Sometimes, you have a certain time period to bring the place "up to code".
Yet, there are times, when you do have to pay fines - normally, when the owner disregards all notices from the city for a very long time. After such a long time, there could be potential liens on the property, put by the city, running at $100/day. Any bills like that could be negotiated down as the city is interested in resolution of the conflicting situation. The lien is not on the owner, it is on the property.
The best course of action is to hire an architect/structural engineer - possibly the one known to the city as a reliable professional. The architect prepares the plans and a licensed contract fixes the issues, and you are good to go.
Cooperation with the city yields good results!
Hope this helps,
Beachfront Realty, Inc.