I am presuming you went through the usual processes of the owner getting permission and a special by-law applying to the works which makes the owner responsible for those works. Given the extent of the works the details of the works would have to have been reasonably detailed to ensure there was clarity regarding responsibility, so that the other owners were protected.
The permission given and by-law would have referred to two bedrooms. To the extent that it is three bedrooms, the permission given and by-law are void, i.e. if you ask for permission and put up a by-law for something on the basis of it being two bedroom and it is three bedroom then the basis for giving the permission and approving the by-law is negated to that extent.
Avenues available to the OC include seeking an order which could require the owner to comply with the permission granted, i.e. to have two bedrooms. Or you could require him to go through the whole process again. (or put it back the way it was)
Jimmy mentioned the Council – did the owner get a DA, the application for a DA would have to have been stamped by the OC, and the owners would have to have approved that in a general meeting. The DA would include detailed specifications of the works. If they didn’t get Council approval then that is very serious and I would contact the Council immediately.
I am curious re the owner building a whole new lot in a basement. There are strict building code requirements for habitable spaces – it may be that the area meets those requirements which includes height of ceiling and windows, but thought I should raise that. A Council will not give approval for habitable areas where the Building Code requirements can’t be met.
Finally – if the owner built a whole new unit in the basement, did you reallocate the unit entitlements in the strata scheme to reflect the new use of that area?