A bed-and-breakfast built to hotel standards was unlawfully approved as a home occupation in a farm dwelling, according to the Oregon Court of Appeals.

The planned two-story building in Yamhill County isn’t plausibly a farm dwelling under state land use law because the “design features of the proposed structure as a whole are those of a motel, for transient lodging,” the appellate court said.

While the proposal’s compliance with hotel construction standards isn’t the only deciding factor in the case, the design “certainly is relevant to a determination of the nature of a structure,” the ruling said.

An innkeeper’s residence within the bed-and-breakfast doesn’t help the building pass muster under law use law, since the “statutory scheme makes clear that the entire structure — not merely a portion of it — must be a farm dwelling,” the ruling said.

The Court of Appeals has overturned the bed-and-breakfast’s approvals from Yamhill County and the state’s Land Use Board of Appeals without sending the matter back for revision or reconsideration.

Friends of Yamhill County, a farmland preservation nonprofit, challenged the lodging facility’s permit to operate in an exclusive agricultural zone and applauds the appellate ruling.

“We contended a hotel building was not allowed in the zone and the Court of Appeals agreed with us,” said Rob Hallyburton, the group’s vice president.

The organization has long been concerned by the proliferation of short-term rentals on farmland, but the bed-and-breakfast proposal “seemed to take it a step further into the realm of a hotel,” Hallyburton said.

The concept was worrisome beyond this particular building, as it could have encouraged conversion of farmland to commercial uses, said Andrew Mulkey, attorney for the 1,000 Friends of Oregon nonprofit, which challenged the permit in court.

“That would have created a huge loophole in the type of uses allowed in the home occupation statute,” Mulkey said.

Structures built specifically for lodging sharply increase the value of farmland, preventing it from being used solely for agriculture, he said. Farmers couldn’t afford to buy such a property without continuing the bed-and-breakfast.

“They would have to become hotel operators. There’s no other way to purchase this land once it gets built,” Mulkey said. “It does lock in the parcel to non-farm uses.”

Attorneys for Grange Hill LLC, the proposed building’s developer, did not respond to requests for comment as of press time.

The bed-and-breakfast was proposed for an 18-acre vineyard parcel in the heart of Yamhill County’s wine country. The proposed 8,200-square-foot building was to include nine guest suites, each with its own bathroom, and a shared kitchen, common area and fitness room.

In court filings, the developer claimed the structure hadn’t encountered opposition from neighbors and that it wouldn’t disrupt the agricultural character of the surrounding area, which is populated with wineries and tasting rooms.

The developer said the county and LUBA rightly concluded the proposal met all the criteria for a bed-and-breakfast home occupation, which is allowed in farm dwellings under state land use law.

“Nothing in the record indicates that the Grange Hill dwelling would not look like a dwelling, not be usable as a dwelling, or lose its character of a residence because it is built to higher safety standards,” the developer said.

As long as the property generated $80,000 in yearly agricultural revenue, which is required for a farm dwelling, the grower didn’t need to inhabit the structure, according to Grange Hill.

“This occupancy requirement is not perpetual — there would be a requirement in the law to condition the approval on the dwelling always being occupied by a farm operator if that were the case,” the developer said.

Though the legal dispute didn’t hinge on the farmer occupancy issue, the Court of Appeals didn’t seem share the developer’s interpretation of the law.

“As an initial matter, it does not appear that the proposed structure could qualify as a ‘primary dwelling,’ because the record does not indicate whether the ‘resident’ would be the person who manages the vineyard,” the ruling said.

Regardless, the Court of Appeals determined building didn’t meet the definition of a farm dwelling because its intended occupants were individuals lacking social or legal relationships, rather than people sharing a household. The building’s permit was approved based on “inverse reasoning” and “false logic,” the ruling said. The innkeeper’s suite doesn’t turn the entire structure into a farm dwelling and qualify the bed-and-breakfast as a home occupation.

Bed-and-breakfasts on farmland aren’t prohibited by the ruling, which simply limits their scale to what’s appropriate within a farm dwelling, said Mulkey, attorney with 1,000 Friends of Oregon. “There is a reasonable pathway to do it. The issue occurs when people start pushing the envelope.”