Call it a loophole, a technicality or taking advantage of the fine print.

Provo Municipal Councilwoman Cindy Clark is hoping to eventually call it unequivocally illegal.

The problem, which Clark said has been reported to her by several constituents, is that of quitclaiming. A quitclaim deed transfers a grantor's interest or title in a property -- Clark said the reports she's gotten were for 51 percent of the property -- to another person without exchanging money and without a warranty.

In this case, the renter can then rent out the accessory apartment, thus getting around the city ordinance requiring owner occupancy in a home with rental apartments.

At Wednesday's meeting, the Provo Planning Commission is discussing a proposed amendment to the zoning ordinance, which would make the quitclaim deeds illegal; the current law doesn't address the situation, so it is legal.

Clark sees quitclaiming as a risky way to circumvent the integrity of the neighborhoods, which are intended to encourage revitalization and owner occupancy. She's heard of three or four instances of what the city is calling sham property transactions, but believes it's more widespread than that and will probably get more popular over time.

"I just think that the city needs to be aware of it," she said. "I don't know what we can do legally. It's just something that we're studying right now."

The ordinance would make entering into a sham transaction a Class B misdemeanor, while defining the transaction as one designed primarily to avoid the owner-occupancy requirement without commercial purpose, except for avoiding the requirement.

It also would be a transaction that doesn't completely transfer the property to the other person because the "original owner maintains beneficial title to the property pursuant to an oral or written agreement, or has executed documents whereby the property will be transferred back to the owner upon the happening of a future event."

The ordinance, though, won't be the magic beans that close the loophole, said Provo City Attorney Robert West.

"My concern is that people would have expectations that it could accomplish more than what may be actually practical," he said, adding evidence of fraud, which has always been the challenge of finding and prosecuting these cases. "The difficulty with sham transactions is usually there's a conspiracy or there's no evidence to show the person is engaging in a sham transaction," he said.

If the city made it illegal, that could provide enough incentive for homeowners to not risk a quitclaim and could provide an avenue for legal recourse if enough evidence was gathered.

That would be done, West said, if one of the parties came to the city, and it could then be prosecuted by gathering a homeowner's history of deeding his property to different people.

"It's just another tool in the toolbox to use," West said.

One possible scenario, and one of the legitimate risks of this kind of transaction, is that the city will find out about these transactions when a property owner who transfers a deed to a renter, who then decides to sell his portion of the property, comes to the city wanting help in getting it back, West said.

However, the quitclaim deeds don't necessarily entail handing the property to the renter to do with as he wishes, Municipal Council Attorney Neil Lindberg said.

"If it's really happening, the owner really isn't selling it or transferring the title to the renter," since the renter only technically has possession of 51 percent of the property, he said.

Selling a house in most cases requires the seller to own the whole property. A home equity loan on 51 percent of the property would be dependent on each bank's loan parameters, he said.

Clark said she assumed homeowners engaging in this type of arrangement were taking steps to ensure this didn't happen, such as a clause in the contract that required the home to be deeded back to the original homeowner in a year. Still, she's not comfortable with the idea.

"It's a pretty risky venture, I would think," she said.

Should the ordinance pass, these transactions could be subject to civil or criminal prosecution, although according to Municipal Council minutes from April 4, when Clark introduced the topic in a study session, most of the council members believed such an ordinance would be enough of a deterrent without actually having to prosecute offenders, the number of which is unknown.

Heidi Toth can be reached at 344-2543 or This e-mail address is being protected from spam bots, you need JavaScript enabled to view it