The only level of stupidity here is how you are handling this? You have discovered circumstances that are lease violations (Your lease does cover them?) which you should serve the tenants with a "notice to cure" as per your state requirements. If your lease prohibits using the garage for a living space, then if they fail to correct, then you have a choice to start an eviction. Just beware that the violation must be a substantial/material violation as the tenants can raise a defense to an eviction if it is not.
With out laying the proper ground work for a possible eviction, ending the lease could be seen as retaliation for the tenants requesting repairs. Please don't do something stupid like lying to the tenant that you are ending the lease for remodeling or for sale, as that can and often does come back to haunt you if you rerent the property instead! As of now, just issue your notice and check to see if they comply.
Don't bother trying to get them to comply by fixing the violations. At best it will be a tempera fix. Just give them proper notice for ending a M2M lease. I bet 100 bucks you have to get them evicted. But at least you get your house back before they total destroy it.