Renovate the old garage or build a new garage?

Why do you want to tear down the extension and then have a dirt and leaf trap corner in the corner of the property? The extension is the most useful thing you can have in that corner. Or do you want to be the fat prey of madness, and have the front three meters of the existing garage just for alignment with the other garage (and similarity to the new plan), and in doing so, among other things, intervene expensively in the statics by demolishing the partition wall? The extension is a gift horse, it doesn't eat bread, you can fill it even without being a hoarder, and the alignment of the fronts of the two garages is not a value in itself.

Non-compliance with the building permit is one thing. The other thing is that it will not be pleasant for my friend.
His house is the one on the right in this picture.

If we were to leave the larger (yellow) garage as it is, it would stand directly in front of his front door.

Also, this passage in front of the 2 (red) garages is common property. If I leave the old garage as it is, I would have to buy his share of these additional 9 m² from him.

Then I must - with deep regret - withdraw my praise for your use of brain or rather turn it into a thanks for your warning example to imitators, that this measure can have a time-critical dimension ;-(