I recently purchased a property that the guest house had an attached 1 car garage that was converted to a bonus/rec room prior to my purchase. I rented it out on a 1 year lease, as a "1 bedroom home with a bonus/rec room." Within the last week of the 2nd month of the tenant living there, she flooded the bonus room due to heavy rains (she failed to see that there was debris on the drain outside the garage door) which cause me to 1) pull up the brand new carpeting & padding, 2) rented a carpet dryer & set up fan until it completely dried. Two days later she claimed that there was mold and she had to go see a doctor and that the doctor told her she had to move out. I told her that I would have it tested for mold if that was case and she just went silent. I immediately went to see her and inspect the room for mold, but I didn't smell anything "musty or moldy" just the smell of new carpeting. She said that she would be staying with her sister and we agreed that I have it aired out with an additional fan, open the window in the room & air out the rest of the house as well. I took it further and I went to the extent of treating it as if there was mold and had it cleaned with detergents, chlorine & treated with borax to avoid mold (there were only 2 walls involved). I tried to reach her and she didn't return my calls, so my thought was she was either very sick or she was up to something. I called her again to let her know the carpet installers would be showing up to and I would be there as I would need to pay them.

She finally called back to say that she contacted the city (for what reason?) and that the city had on file that they had tagged the home as "inhabitable" because of the garage having been converted (prior to my purchase of the property) and that they told her that she could move out, break the lease and that she would be entitled to all her deposits.

So my questions are, after all this, could it be that she was trying to get out the lease? Can she call the city to tag or claim the house as "inhabitable" to get out of the lease & get all her deposits returned? I live in the same city and my home also had a converted garage (converted to storage room) and it has now been over 10 years & they have yet to contact me. So, can the city tag a house as "inhabitable" because there is attached garage that is being used as a bonus/rec room? If so, then wouldn't this just affect the garage?