First of all, there’s a principle that comes up a lot in property disputes – buyer beware! This means, loosely, that you acquire a property’s problems when you buy the property’
It sounds like your pre-sale strata search did not reveal that there had been a problem with the apartment’s floor, or you didn’t realise the significance of the information. Either way, unless you can prove that the vendor deliberately misled you, the issue is yours to fix.
Even if you can show you were misled, pursuing the vendor may be more trouble than it’s worth.
Carpetting the bedroom floors is an entirely reasonable request and anyone who, like the vendor, removes the most effective insulation – carpet and underlay – from bedroom floors is a selfish ass.
Regarding liability, you are entitled to ask why the downstairs neighbour has waited until the apartment was sold before taking action and a Tribunal might – and I stress MIGHT – rule that they have shared culpability for not making more of an issue of this – especially if there is nothing in the strata records about flooring problems.
As for the proposed by-law, and I am not a lawyer, but the floors are common property and the committee will be able to make demands on the quality of flooring that you install when you fix it. If the existing floor was okay by the current standards when it was installed, there’s not much they can do.
Finally, this sounds like one of those disputes that you want to resolve as amicably as possible. Meadiation and compromise are the answer. Be prepared to give a little, even, for instance, agreeing to make it a condition of future rental that tenants are aware of the problem and agree not to make excessive noise.
That might limit the range of tenants to whom you can let the flat but may be a small price to pay in the long run.