The parents of the victims - who say the two girls, aged seven and eight, are at risk of seeing their abuser every day - are now planning civil legal action to have the youth removed.
Anti-paedophile campaigners say the case highlights an anomaly in the law in which it was possible to ban the abuser from living in the North Wales village before he was found guilty, and yet impossible to keep him away once he had been convicted and freed.
Lawyers are now attempting to find a way of taking civil action against the abuser on the grounds that he is causing a nuisance or harassment to the families by being there.
A 30-year-old man who warned people in the village about the offender in a leaflet campaign has been charged by the police with harassment.
He said: "This youth came to live in a house directly opposite the home of one of the girls, and four doors away from the other. The families were so shocked they did not know what to do and asked me for advice. We all thought that everyone here needed to be aware of what was happening and I wanted to alert people to the dangers.
"I and many other people find it crazy that I can be charged with causing distress to a child sex offender when the children he abused are forced to live opposite him. In my view, by simply being there he is harassing those children."
The 16-year old abuser was sentenced to four months in jail last year after being found guilty of two charges of gross indecency, and two of indecent assaults involving the two girls.
"There is no control over where he resides, although they could and did restrict his residence while he was on bail and still unconvicted," said a solicitor representing one of the families. "We are now looking for a civil remedy because of the problems the girls have with the offender living opposite them. It is a very awkward situation for them and their parents to be in.
"The problem is that we cannot find any precedent for what we want to happen. We are looking at the possibility of having an injunction for a continuing nuisance in that he is offending the injured party just by his presence and that he should move."
Leading child law specialist, Allan Levy QC, said yesterday: "I think that under the law as it stands, unless there is a threat of violence or actual harassment then there isn't an obvious remedy for people in this situation. There obviously are issues of personal liberty involved too when you have the right to remain in property."
A Home Office spokesman said: "People cannot be forced to move address after they have served their sentence. The new Crime and Disorder Bill is introducing extensive supervision which will include people whose sentences are under one year."Reuse content