Legal Question in Real Estate Law in California

I am a a little unclear as to your question. If you do not live in the illegal rear garage, then you can not use the deficiency of that area to justify not paying rent for the part you live in. In your rental agreement, is the garage area included in the rental space? If it is but makes up only a minority of the property leased, then it being illegal does not go to the heart of the matter to overturn the contract but merely allows you damages in the form of being able to deduce what you are paying for the garage from the total rent.

Santa Cruz has rent control, which often imposes legal duties not found any where else, so call up the rent board and see if their rules cover the situation. But otherwise it is like turning in a test paper in class; do you get an "F" because you put down the wrong date?

I am more concerned that you are asking whether you can blackmail your way out of your lease. "If you don't let me out of my lease, I'll tell the inspectors about your illegal unit!" sounds like blackmail to me.