The lawyer for the owners of a sprawling 110-year-old mansion in one of Winnipeg's most exclusive neighbourhoods says they'll sue the city, after a city committee halted plans to demolish the property to make way for a new development.

"This is outrageous," said Jamie Kagan, the lawyer representing a group that bought the mansion at 514 Wellington Crescent in April 2016.

"You have a multi-million dollar development being held up — after you've issued a building permit, after we've been seven weeks in demolition, and then you say stop."

Kagan spoke to media Thursday after a nearly seven-hour meeting on the 8,000-square-foot mansion, originally scheduled to be demolished in June.

That plan was stopped when the Crescentwood neighbourhood — where the mansion is located — was nominated as a heritage district on June 6, suspending the new owners' demolition and building permit hours before demolition was to begin.

The destruction of the home has been vocally opposed by the Crescentwood heritage district conservation committee and a community group called Save 514 Wellington.

On Thursday, the city's property and planning committee rejected Kagan's appeal of the decision, after being split in a 2-2 vote.

Kagan said afterward owners "absolutely" plan to sue, and he expects to have the lawsuit ready within the month.

'Capital is going to flee the city': lawyer

Christine Skene, a member Save 514 Wellington, said she's happy with the result.

"It's the outcome we wanted," she said. "However, there's some bittersweet part to it, because the owner has pretty much demolished the interior of the house."

The property owners say the home would take millions to restore and is a hazard empty and unused. (Trevor Brine/CBC)

Jeff Thompson, the principal of the group that purchased the home, told CBC News Wednesday he and others in the group had planned to build multi-family dwellings, and each intended take a suite of their own for themselves and their families.

"[City planners] loved what we were doing … they wanted an elegant modern building that fit in with the neighbourhood," he said Wednesday.

Kagan argued in the meeting Thursday orders to stop the tear-down were motivated by political pressure from area residents. He said the property sat on the market for a year before his clients bought it, adding the group has spent over $2 million to develop the land, including the purchase price.

St. Vital Coun. Brian Mayes, who sits on the committee, called the issue the "first of its kind."

"Ultimately, the four [committee members] had to make a choice, and my choice was, I wasn't prepared to see the building come down," Mayes said after the meeting. "I didn't think the city had acted in bad faith."

Kagan said he's concerned the city's decision will have a chilling effect on developers.

"Capital is going to flee the city of Winnipeg as fast as it can," he said. "Everybody understands that your investment may not work out. But you can't all of a sudden be stymied halfway through the process because somebody at city council decided they want to make a change."

Submissions for, against demolition

The meeting heard submissions in favour and opposed to the demolition and the designation of the area as a heritage district.

"The tyranny of minority, especially the affluent minority, can disrupt developers like us," said Tim Comack, who is developing infill housing five blocks away on Grosvenor Avenue.

Students from St. Mary's Academy and a group of adults showed up with signs outside the home in June, protesting the planned demolition. (Tyson Koschik/CBC)

Skene presented a letter from Ashleigh Everett, daughter of Sen. Douglas Everett, who lived in home since 1961 and raised his family in it.

The letter disputed Thompson's statements that the house was in disrepair and said her father wouldn't have sold if he'd known the home would be demolished — although Kagan insisted the previous owners were informed of the plans at the time of purchase.

After the meeting, Skene said she sympathizes with the difficulties encountered by all parties in the process, and wants to see improvements in similar dealings in the future.

"I think there's huge frustration on city council and in planning and for developers. … I don't minimize that that some of the things that they've had to deal with have been frustrating," she said.

"But you don't then turn around and give them carte blanche to do what they want."