First of all, no you do not need to install a water heater. Your garage is not zoned for living in, and he's not supposed to be living there. Does he get mail at the studio? If so then that establishes residency and you better lawyer up. if not I don't see why you can't act like you just found out about him living there last week, and throw him out! Whatever you do, DON'T act like you knew it and it was OK with you.
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