Is it illegal to sublet a basement without your landlord knowing?

We just moved to Calgary and found a basement suite rented out by a family from Columbia. They had told us that the Landlord does not know that he is subletting the basement to other people. We had left for 3 days during Christmas and had returned to find that a iPhone 5 had been taken while we were gone. Our solution was to find a new place before the new year, not have to pay another months rent here, and also get our damage deposit returned to us. We had discussed the matter with them upstairs and they had argued that it is "one months notice to move out" and that they are "keeping the damage deposit" if we were to move out before a month notice. So what we would like to know is that IF his landlord really doesn't know that he is renting the basement to other people, could something be done? Or if the landlord does know, is there STILL something that could be done, since there also was no lease signed. Someone please help.

Look at the terms of your own lease. Does the premises that is covered by the lease exclude the basement or does it include the basement?

This is a very confusing question. Are you saying that you are the subtenants, or that the family from Columbia are subtenants, or that you all are?

First, you broke the terms of the agreement and if they come after you, you might have to pay.

However, if sub-leasing was not permitted in their lease, they technically didn't have authorization to do so and your lease would be considered invalid.

File a claim in small claims court for the return of your security deposit and let them try to fight you. You did break the lease illegally, but that might be secondary to the initial issue here. Did they rent you something for which they had no right?

It was very probably illegal to sublet the space, depending on what the lease said. You will have to take them to court to get your money back and its not clear you would win, since you signed a lease that you broke, but it you can prove the sublet was illegal then the lease would be void and you should get your money back (though really, no guarantees in small claims court - I've seen some very dubious decisions by judges, though they usually do what seems like the right thing).

You could also wait a bit and if they resublet the place, threaten to call the landlord and report them if they don't give you your deposit back. You can't really report them for the prior illegal sublet since you are now gone (you could but not sure if the landlord would do anything and it won't get you your deposit back).