First, I think everyone else has hit it on the head. Unless you're willing to spend $$$ for personal pride or principle, I'd spend the lawyer $$$ on finishing the garage. (Just be sure to get your expansion joints in.) 'Nough said.
As an aside, fortunately, my particular jurisdicion 'listens' to their residents. When we bought our home in 1994 (then it was 21 years old), the U&O required a baniser and balluster system to be installed where the steps were 'open' into the foyer. We were SURE that 1) the owners would put something cheap in there, and 2) it wouldn't be something we 'liked'. So, we asked the Township if we could put something in there ourselves. Well, the home wasn't 'ours' (yet) so they said no (as did the Owners at the time.) So, my wife and I worked out an agreement.
We asked if we could Indemnify the Township of any liability or loss if nothing was done to the 'open space' in question. On top of that, we asked for 90 days to put something in. Well, much to my surprise, EVERYONE agreed. You see, in my case, the Sellers didn't spend a dime, the Township was not liable for any loss or harm, and WE got what we wanted for the rail and balluster system! Happy-happy, joy-joy. I know it doesn't always work out this well, especially in your case. But I'm glad it did in mine! You know, if you're a masochist, consider volunteering for your local Zoning Board, or something. Some day, perhaps, your U&O Inspector will need a variance to put up a shed. (Payback is a b---h.)