What is the penalty for building an apartment in a garage with out a permit and how do I fix this problem?

You must obtain a permit and make whatever changes are necessary to satisfy the inspectors.

The procedure may differ by County, but as a general rule you will have to pay double the amount that would have been paid for the permit, to obtain a permit setting forth corrective actions needed to obtain an after-the-fact permit. The ease of obtaining that permit will likely depend on whether you were the owner at the time of the illegal conversion.

Contact the local housing/zoning department to see if they will issue a variance.