A sharply divided Cambridge City Council last night defeated one of the strongest recent challenges to the city's stringent codes preventing the conversion of rent controlled apartments to condominiums.

On the strength of councillor Alfred E. Vellucci's swing vote, the council denied an exemption from the anti-conversion ordinance to a group of would-be condominium owners at 36-42 Linnaean St. and 4-6 Washington Ave.

The council had considered granting the Linnaean and Washington tenants special relief from the city's housing codes during the last two months, but critics of the proposed amendment said it might cause the entire code prohibiting condominium conversion to be overturned in the courts.

During recent council hearings Vellucci had sided with the tenants, allowing the council's conservative Independent faction to pass a policy resolution urging the rent control board to exempt the tenants from the ordinance and to send the proposed amendment to a third and final consideration last night.

But after another lengthy hearing last night, this time with an attorney for condominium developer David Zussman, Vellucci said he was beginning to "smell something fishy" in the deal arranged between Zussman and the 28 tenants seeking permission to purchase their apartments as condominiums.

Vellucci proposed, and a five member majority of the council approved, a substitute amendment to the anti-conversion code which would allow the exemption of tenants, seeking to form a "limited equity cooperative."

Under the plan for limited equity ownership of housing, owners would agree to sell their property in the future at a price no greater than the original purchase price, plus allowances for capital improvements and inflation.

The council temporarily tabled the limited equity plan, after giving its initial approval, to allow for public comment on the proposal.