The tiny house on Sheppard Ave. W. may be vacant and run-down, but the story behind it is replete with terrorism, international intrigue and diplomatic headaches.

An Ontario court found that the building — as well as another empty property in Ottawa and two bank accounts — is owned by the Islamic Republic of Iran.

And last week, a Toronto judge dismissed the country’s arguments of state immunity from seizure of property and ordered that the assets be turned over to American victims of Iran-sponsored terrorism who have won cases against Iran in U.S. courts.

The complex case and subsequent ruling comes as the federal government is looking to re-establish diplomatic relations with Tehran that were cut off by the Conservative government in 2012.

It also highlights the little-known fact that federal legislation allows for victims of state-sponsored terrorism from other countries, and their families, to ask Canadian courts to seize Iranian assets here if they can prove their case.

The Justice for Victims of Terrorism Act, enacted under the former Conservative government, currently lists Iran and Syria as state sponsors of terrorism.

The case involves dozens of American victims, their families and estates who had been successful in getting judgments against Iran in U.S. courts, and then applied north of the border to collect some of the damages they claim they’re owed.

“They’re very happy, obviously, with the result,” said lawyer John Adair, who represents some of the victims and their estates.

Among the plaintiffs are legal guardians and family members of Edward Tracy and Joseph Cicippio, who were kidnapped by Iran-backed Hezbollah in Lebanon in the 1980s and tortured during their years in captivity.

Tracy was awarded $18.5 million in damages by the U.S. courts in 2003, while Cippio’s relatives were awarded $91 million in 2005 for emotional distress.

“Terrorism is one of the world’s greatest threats,” Superior Court Justice Glenn Hainey wrote in his decision rejecting Iran’s numerous arguments regarding immunity.

“This case involves claims by victims of terrorist attacks carried out by two terrorist organizations, Hamas and Hezbollah. The defendant, the Islamic Republic of Iran, has been designated as a foreign state supporter of both of these terrorist organizations.”

Iran’s Toronto lawyer, Colin Stevenson, said the country intends to appeal.

The battle over the house in North York and the other assets began in earnest two years ago, when Superior Court Justice David Brown found that they were “beneficially owned” by Iran.

The country did not participate in the court proceedings at the time, but maintained that the building at 290 Sheppard Ave. W. in Toronto and 2 Robinson Ave. in Ottawa were legally owned by active corporations, and not held in trust for Iran.

Property records show the North York building was purchased in 2005 for $827,000 by Farhangeiran Inc., whose sole director listed in the corporate registry is Fazel Larijani. A former cultural attaché at the Iranian embassy in Ottawa, Larijani is part of a powerful Iranian family whose brothers have served as Speaker of the Iranian parliament and head of the judiciary.

The property is now estimated to be worth closer to $1.3 million.

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The Ottawa building was purchased for $1.6 million in 1998 by Fatima Cultural Activities and transferred to the Mobin Foundation in 2001, property records show. The sole director of the foundation listed in the corporate registry is Seyed Adeli, a former Iranian ambassador to Canada.

It’s estimated the property’s price tag is now closer to $3 million.

According to Brown’s 2014 ruling, Iran also had two Canadian bank accounts that were considered “non-diplomatic” — one with Scotiabank containing $1,651,942 and another with RBC, holding €333,445.23. The funds were deposited into a trust account pending last week’s ruling ordering that the money be given to the plaintiffs.

Both the Ottawa and Toronto properties were once known as cultural centres, but many Iranian academics in Canada believe otherwise.

The North York property was called the “Center for Iranian Studies,” and its now-defunct website said it was a non-government organization supporting those interested in Iranian culture.

But in an open letter in 2010, eight prominent Iranian academics in Toronto demanded to know what took place at the centre and who was funding its activities. They said it was really a front for the Iranian government. The house was sparsely furnished when the Star visited that year.

“We were all surprised. What is this? To which university is it linked?” said Saeed Rahnema, a retired York University political science and public policy professor who was one of the letter’s signatories.

“When we found out it’s not linked to any of the universities, then of course people got suspicious.”

When the Star visited again in 2014, the blinds were drawn and there was no answer at the door. Neighbours reported seeing less activity next door after Iran’s diplomatic mission was expelled in September 2012.

Farrokh Zandi, a York University professor and former president of the Iranian-Canadian Congress, told the Star at the time that Iran has used so-called cultural centres to promote pro-Iranian regime interests abroad.

He said the major concern among Iranians living in other countries is that their old government is spying on them through such centres.

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