Sorry, I forgot one important detail here. After the original tennants moved in (and after a "verbal contract" was agreed), they sought, and were given verbal permission to rent the other room to at most two more people. At the time, the landlord didn't mention anything about an extra cost being involved. It was only a week later when keys for the sub-tenants were required that he decided he wanted more money.
Since the original incident occured, the landlord has actually entered the property without requesting permission from the tenants. To date, the tenants are fully paid up.