You have my sympaphy Suade, to start with you need to find out who actually owns the flat and write to them either direct or to the letting agent/council they have instructed to let it. Contact your enviornmental officer at your local council and report what is happening. With regards to the twelve flat ruling that is not strictly true depending on where you live it can be as little as four flats. What can happen even then is that you could get a private investor buy a property and to be honest not care who they rent to as long as they get their rent. Had a similar problem in a block i lived in 6 months ago, one owner gave the flat directly over to the council to rent, and one went through a letting agency who kindly let it to three students, both lots of tenants were a nightmare, but the owners didn't care their rent was being paid, hence so was their mortgage.
Good luck, I hate to say it but in the end i sold up and moved as it was getting too much.
Baby Moo