Farm dwellings in agricultural zones can’t serve as “bed-and-breakfasts” under home business permits unless inhabited by farm operators, according to the Oregon Supreme Court.

The state’s highest court has decided a farmland dwelling in Yamhill County was improperly granted a home occupation permit for a bed-and-breakfast regardless of whether the farm operator lived there.

The ruling pertains to a 10-room bed-and-breakfast in an 8,200-square-foot home proposed by Grange Hill, the owner of an 18-acre vineyard property in an “exclusive farm use” zone.

To qualify for such a home occupation permit, a dwelling must satisfy the land use requirements for structures that are normally allowed in the EFU zone, the Oregon Supreme Court said.

“When, as here, the purported category of dwelling is a ‘primary dwelling’ on EFU land, those requirements include that the structure will be the home for a farm operator,” the state’s highest court said.

The owner’s home permit occupation was approved by Yamhill County and affirmed by the state’s Land Use Board of Appeals, but later overturned by the Oregon Court of Appeals.

While using a different legal analysis than the appellate court, the Oregon Supreme Court has now agreed the permit wasn’t properly authorized and sent the case back to LUBA for reconsideration.

LUBA wrongly dismissed as “irrelevant” the requirement for the dwelling to be inhabited by a farm operator, incorrectly deciding that it only applies to the actual construction of the house but doesn’t continue to govern whether it can serve as a bed-and-breakfast, the ruling said.

The Oregon Supreme Court decision favors farmland preservation advocates who opposed the bed-and-breakfast, Friends of Yamhill County and 1000 Friends of Oregon, who worry that “home occupation” permits are justifying the development of lodging facilities on farmland.

Farmland preservation advocates claim that allowing lodging facilities and similar businesses to operate in agricultural zones can disrupt farming practices and inflate the value of such properties, rendering them too expensive for growers to afford.

“Friends of Yamhill County is pleased that the Supreme Court has again affirmed that farmland is for farming and farmers, and not for luxury hotels,” said Rob Hallyburton, the group’s representative.

Representatives of Grange Hill were not available for comment on the ruling as of press time.

According to the overturned LUBA’s decision, the Grange Hill property continued to meet the “design standards” of a dwelling, which means it was eligible for a home occupation permit even if it was inhabited by an innkeeper rather than the farm operator.

The Oregon Court of Appeals said that LUBA erred in affirming the county’s permit because the structure was primarily a “motel” and not a dwelling, foreclosing its use as a bed-and-breakfast home occupation.

The Oregon Supreme Court has now agreed the permit’s approval was “unlawful in substance,” though it disagreed with the appellate court’s interpretation that the structure didn’t qualify as a dwelling.

Just because a structure has “some characteristics of a motel” does not mean it’s no longer a dwelling, as the Legislature did not intend to preclude home occupation permits for structures with large portions devoted to “commercial purposes,” the ruling said.

Based on the legislative history of home business regulations, it is more relevant whether a dwelling is allowed outright in the farmland zone, which in this case requires it to be occupied by a farm operator, the Oregon Supreme Court said.

“In other words, it is not enough that the structure will be occupied by ‘a person as their household,’” such as an innkeeper, the ruling said.

Inn the Ground, another bed-and-breakfast involved in a similar land use dispute, believes the ruling should dispose of the case in its favor, said Mark Hoyt, its attorney.

The Supreme Court has ruled that a home occupation must be conducted in a structure approved as of right in the EFU zone, which in this case was a farm dwelling but will include others as well, he said.

In the case of Inn the Ground, the structure is approved outright as a replacement dwelling, which should allow the proposal to proceed, though opponents may disagree, Hoyt said.

“The real impact of the decision is the requirement that when a home occupation permit is sought, the applicant must show that the structure in which the home occupation will be conducted is a structure allowed as of right in an EFU zone,” he said. “If that standard is met, the design of the structure itself is of limited relevance, and the other factors applied to approval of home occupations come into play.”