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If a tenant is subletting then they may be in breach of their rental conditions. Perhaps the real estate agent that is handling the property should be notified, and/or the owner of the Lot. They may not be aware that subletting is occurring.
Council may not have an input into overcrowding, as the SM has stated, but the new strata Act permits the OC to pass a by-law against overcrowding. Perhaps your scheme can adopt such a by-law at the next General Meeting.
Here is an extract from the OFT site regarding over crowding:
“Overcrowding can impact on the amenity of residents living in a strata scheme and pose significant health and safety risks. Common problems that arise can include noise problems, excessive water use, and insufficient parking in the complex. It can also place a strain on facilities and common property, and create fire hazards.
The reforms allow owners corporations to make a by-law limiting the number of people who can reside in a lot (but schemes must still allow no fewer than two adults per bedroom), so that strata schemes are able to better manage overcrowding.
Schemes wanting to impose such a limit will be able to introduce a by-law by passing a special resolution.
If any owner or tenant breaches the by-law after the notice has been issued, the owners corporation will be able to apply to the Tribunal, and impose penalties of up to $5,500 for the first offence and $11,000 for each and every subsequent offence detected within 12 months of the imposition of the earlier penalty. Larger families will not be discriminated against because the by-law will not apply to children and an overcrowding by-law cannot be inconsistent with the planning approval for the building.”