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Sometimes the best way to solve a puzzle is to turn the pieces around.

When Toronto's Kohn Shnier Architects designed a house on a downtown laneway a few years ago, they had quite the puzzle to solve: The lot was tiny, and complex zoning rules forced them to save some elements of an old cottage on the site.

So they turned the house upside down - putting the bedrooms on the ground floor, and a wide-open kitchen, living room and dining room upstairs.

"In other parts of the world, it's not an uncommon idea," architect Martin Kohn explains while walking through the elegant, 1,200-square-foot house, built in 2004. And as his firm examined the site on Croft Street in the South Annex, "It made perfect sense to have the main floor of the house up where you have open space, and the small rooms down in the tight area of the house."

It's an increasingly common move these days for architects and designers trying to build on crowded city sites. In fact, a pair of new houses just a block down on Croft follows the same model.

The Kohn Shnier house, with its remarkable quality of space, demonstrates why. As you walk in from the front, you're welcomed by a small courtyard.

Inside, the L-shaped ground floor holds a master bedroom and two small, bright guest rooms; but upstairs, the house balloons into a grand living area. "It's like Frank Lloyd Wright using low entrance areas to make the next space seem bigger - even though it isn't," Mr. Kohn says.

In fact, the upstairs is just 700 square feet, but it feels much larger. Basically a square with two corners cut out, it has views in all four directions, including one to the downtown skyline across some treed and very typically Torontonian backyards. Instead of saving the great views for the bedroom, this house uses them to full advantage.

"The minute people get up here, they're wowed," says one of the owners, relaxing with a cappuccino in a Knoll armchair.

Along with the upside-down plan, there are also a number of classic small-space design strategies at work here. Mirrors disguise some chunky pieces of wall. Built-in shelving and teak cabinetry - all by Kohn Shnier - are fitted into the corners. And there are very few different materials: the teak, one variety of hardwood flooring, and one type of long white ceramic tiles recur throughout the house.

"Everything has been thought of," says the owner. And it's furnished sparely and in excellent taste - an array of matching Eames DCM chairs, a white Minotti sofa, and a set of nesting tables by the artist and Bauhaus professor, Josef Albers.

It's hard to tell the place wasn't tailor-made for its current residents, but they actually bought the house two years ago from its original owners. Kohn Shnier agreed to make a few changes.

The first couple were visited frequently by their kids and grandkids, so they had one bedroom and "minimum accommodation" for guests, Mr. Kohn says. It was "like you're on a train, but fairly luxurious" - guest bedrooms each with a desk and bunk bed.

Now those are office spaces, and the basement playroom has been converted into a guest suite with bathroom and steam room.

The grand total: two bedrooms, two offices, three fireplaces and four bathrooms - if you include the outdoor shower added to the back patio last year.

You couldn't put all that into a regular, skinny Toronto house of this size, and you definitely wouldn't have the privacy to take an outdoor shower. These are the rare privileges of building on a laneway, as some Torontonians (especially architects) have been struggling to do for 30 years.

"What's spectacular about the space is that it's freestanding," the owner says. "It beats any condo I've been in."

The house makes use of the open space between rows of Victorian houses, generally filled by garages and messy yards. And yet it's not a pioneer; in fact Croft Street is officially a street and not a laneway. There are other houses here that date back a century, long before zoning restrictions existed to limit such development.

Still, the process of "renovating" a wood cottage into a 21st-century house involved a complex series of negotiations, and some wild design moves.

For one thing, an entire corner is hanging in the air - supported above a shiny black car by a steel beam. Complex, expensive, but necessary to make it through the maze.

There aren't many architects who could navigate it with such flair.

Mr. Kohn and his partner, John Shnier, are highly decorated professionals (when Mr. Kohn talks about a tiny, excellent apartment he had in Rotterdam, he's too modest to mention that he was there working for one of the world's top architecture firms, Rem Koolhaas's Office for Metropolitan Architecture.)

But if the house is an exception, it still proves a couple of points. One, as the owner says, "You don't need a lot of space. You just need great space." And two, sometimes it helps to turn things around.

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