Hi, I have a large single family house 5 bedroom house that I am renting out to a large extended family of 4 adults and 5 children (9 occupants total).

I wouldn't count on that to satisfy your owner occupancy requirement, because there is no guarantee someone will agree to this.

I invest in C+/B- areas where there is healthy demand by owner-occupants, so I can offload my SFH/duplexes to them. 

Even then, their driving record can still put them out of business on zero notice.Challenges getting into the taxi industry are part of what led to the rise of ride sharing, among a number of other factors.Discrimination based on occupation may be an Equal Housing violation in the U.S. as well.

Although it is a TAW arrangement, a lease was signed at occupancy with terms expressly prohibiting additional tenants and/or subletting without my approval. 

Great thread-Here's one I just came across-Misses 3 pm appointment, then later that night I get this e mail:"The occupants showed us the apartment at 3pm.

I have clients that list their homes exclusively on those sites without marketing anywhere else and get incredible occupancy rates.

YOU will have the city down on you for over occupancy.

Your friends could just leave the tenants the way there are as a property already 2/3 rented might appear more attractive to the next buyer.But to accomplish what you want, serving notice to the tenant violating the occupancy limit and filing for eviction if they do not comply sounds like a good start.  

Two adjacent towns where I seek out deals have two slightly different definitions when unrelated people are the occupants.