The manufactured home is not on what I believe would be called a permanent foundation or footing, but it was set up correctly and passed permit inspection.  

Don't do that unless you have installed some other form of permitted drain system for the basement since it is likely against code to cover it.

So prior tenants will not be affected and new ones will know because your new lease will state no pets.. the only hiccup is service animals so you'd have to permit that and maybe this guys dog is a service animal.. ya don't know...What to do with current pet guy about rent. 

Does converting to sub-meters also require any permits or licences? 

Currently I own a business which runs smoothly week to week but still am building the clientele and customer base so here is where the problem comes in.

These homes can be as custom as you want.

So I'm gonna assume it needs to be converted back to a garage, but the lady swears it's permitted.

@Wesley Nye Permits pulled for renovations and/or conversion?

Use mail merge to create custom letters, postcards, door hangers, etc. with a product like MS Word.

If you permit him to stay your the landlord / owner and yes you could be held responsible and may need to force eviction action if he fails to leave.