“Dwelling” for Home-Occupation Permits Must Independently Qualify as an Allowed Category of Dwelling in the Zone – Friends of Yamhill County v. Yamhill County, 373 Or 790 (2025)

1. Introduction

In Friends of Yamhill County v. Yamhill County, the Oregon Supreme Court revisited the relationship between Oregon’s exclusive farm-use (EFU) protections and the conditional use of “home occupations.” At the heart of the dispute was whether a proposed nine-room bed-and-breakfast, to be built on vineyard property zoned EFU, satisfied the statutory requirement that a home occupation be operated “substantially in the dwelling.”

The case pitted conservation group Friends of Yamhill County (“Friends”) against property owner Grange Hill LLC and Yamhill County. Friends asserted that the structure could not qualify as the dwelling because it was not, in fact, a primary farm dwelling—a category of dwelling allowed as of right on EFU land—inasmuch as it would not be occupied by the farm operator. LUBA sided with the County; the Court of Appeals reversed, labelling the building a “motel.” The Supreme Court has now clarified the correct statutory construction, partly affirming and partly reversing the lower courts.

2. Summary of the Judgment

Holding. For a home-occupation permit under ORS 215.448, the structure described as “the dwelling” must itself meet all requirements of a dwelling category that is normally allowed in the zone. In EFU zones, if the claimed category is a “primary dwelling in conjunction with farm use,” the structure must be designed and used as the home of the farm operator. LUBA erred by treating that farm-operator requirement as irrelevant.
Outcome. The Supreme Court:
- Rejected the Court of Appeals’ broad rule that the entire structure must be exclusively residential and devoid of “motel” features;
- Nevertheless agreed that LUBA’s order was “unlawful in substance” because it misconstrued ORS 215.448;
- Reversed LUBA’s order and remanded for further proceedings consistent with the clarified standard.

3. Analysis

3.1 Precedents and Statutory Context Cited

ORS 215.203 / ORS 215.283. Core EFU provisions: EFU land “shall be used exclusively for farm use,” save for specified categories. “Primary or accessory dwellings customarily provided in conjunction with farm use” are among those categories.
ORS 215.448. Authorises counties to allow “home occupations”; imposes four statewide conditions, including the “dwelling” requirement.
Brentmar v. Jackson County, 321 Or 481 (1995) – distinguishes uses “as of right” from conditional uses on EFU land.
Lake Oswego Preservation Society v. City of Lake Oswego, 360 Or 115 (2016) – cautions against over-reading statutory omissions.
PGE v. Bureau of Labor & Industries, 317 Or 606 (1993) & State v. Gaines, 346 Or 160 (2009) – the court’s canonical framework for statutory interpretation.
1000 Friends of Oregon v. Clackamas County, 320 Or App 444 (2022) – cited by the Court of Appeals for the definition of “home,” but ultimately not adopted by the Supreme Court.

3.2 The Court’s Legal Reasoning

Textual Reading of ORS 215.448. The statutory phrase “operated substantially in the dwelling” appears in the context of other sub-paragraphs that speak of “other buildings normally associated with uses permitted in the zone.” The Court reasoned that, because the legislature explicitly restricted “other buildings” to those normally allowed, it necessarily intended the word “dwelling” likewise to signify a dwelling that is itself normally allowed in the zone. Otherwise, sub-paragraph (B) and subsection (3) (which bars authorising construction of structures “not otherwise allowed”) would be undermined.
Contextual Anchors: EFU Dwelling Categories. In an EFU zone, the only dwellings “normally allowed” are:
- Primary dwellings “customarily provided in conjunction with farm use” (ORS 215.283(1)(e));
- Accessory or relative dwellings under tightly defined reasons connected to the farm operation (ORS 215.283(1)(d)).
Therefore, if an applicant selects the “primary dwelling” path—as Grange Hill did—the structure must satisfy the separate regulatory requirement that it be the farm operator’s home.
Legislative History. The Court traced statutory evolution from 1983 (initial home-occupation statute) through 1995 amendments addressing “cottage industries.” The history showed the legislature’s deliberate balance: enabling small, resident-run businesses without authorising construction of buildings not otherwise allowed. This corroborated the textual conclusion that “dwelling” was never meant to be a free-standing, generic term divorced from zoning-code categories.
Rejection of the Court of Appeals’ “Entire Structure Must Be Residential” Rule. The Court acknowledged that ORS 215.448 permits a resident also to use portions of the structure for commercial purposes (the statute anticipates up to five employees), and later statutes explicitly mention “bed and breakfast facilities” as possible home occupations. Thus, nothing in the legislature’s design required that every room remain purely residential.
Error of LUBA. LUBA assumed that once County approval for a primary farm dwelling issued, the farm-operator occupancy requirement “fell away.” The Supreme Court held instead that the requirement remains critical whenever the same structure is later proffered as “the dwelling” for a home occupation. Because LUBA ignored that, its order was unlawful.

3.3 Anticipated Impact

Practical Proof Burden. Applicants for rural bed-and-breakfasts (and other EFU home businesses) must now demonstrate, both initially and on any later conditional use applications, that the structure satisfies all elements of an allowed dwelling category—generally, that a bona fide farm operator will live there. Counties cannot separate the two inquiries.
Guidance to Counties & LUBA. The decision sets a clear analytical roadmap:
1. Identify the structural category asserted (primary dwelling, accessory dwelling, etc.).
2. Verify that the structure satisfies every statutory-and-regulatory criterion for that category.
3. Only then evaluate whether the home-occupation conditions (employees, interference, etc.) are met.
Sharper Limits on “Destination” Uses. Large, tourism-oriented facilities on EFU lands face heightened scrutiny: Where no farm operator resides, the structure cannot be characterised as a primary dwelling and therefore cannot host a home occupation.
Legislative Signal. While the Court preserved flexibility for genuine resident-run enterprises, it reinforced the primacy of agricultural land-preservation goals expressed in ORS 215.243.
Potential for Rulemaking. LCDC and DLCD may respond with clarifying rules on how counties verify farm-operator occupancy and how they monitor continuing compliance.

4. Complex Concepts Simplified

Exclusive Farm Use (EFU) Zone: A rural zone reserved primarily for commercial agriculture; non-farm uses are tightly limited.
Primary vs. Accessory Farm Dwellings: Primary dwelling: the main residence of the person who actively manages the farm operation.
Accessory/relative dwelling: a smaller unit (often a manufactured home) occupied by farmworkers or relatives assisting in farm management.
Home Occupation: A small business run by a resident, allowed on EFU (and other rural) lands if it meets statewide conditions: operated by a resident/employee, up to five on-site employees, conducted substantially in the dwelling or similar building, and not unreasonably interfering with farm uses.
Substantially In the Dwelling: Most of the business activity (storage, production, services to customers) occurs inside the residence or an allowed accessory building—avoiding sprawling commercial footprints.
LUBA (Land Use Board of Appeals): Oregon’s specialised tribunal for reviewing local land-use decisions. Functions as an intermediary appellate body before judicial review by the Court of Appeals or Supreme Court.

5. Conclusion

The Oregon Supreme Court’s decision articulates a middle path. It rejects the Court of Appeals’ rigid view that any “hotel-like” features disqualify a structure as a dwelling, yet affirms the overarching statutory discipline that only structures genuinely qualifying as “dwellings” under EFU law may host a home occupation. That determination turns on the land-use code, not on a generic dictionary definition.

The new precedent sharpens the analytical sequence for counties and LUBA: (1) verify that the structure meets every element of an allowed dwelling category in the zone; (2) only then apply the home-occupation criteria. In EFU areas, this typically requires proof that a farm operator will actually reside on the property. The ruling therefore strengthens farmland-protection goals while continuing to leave room for true cottage industries that arise from, and remain anchored by, the resident farming community.

As rural entrepreneurs, planners, and litigators digest this opinion, the watchword is integration: a home-based business must be integrated both physically and legally into a dwelling legitimately placed on farm land. Anything less risks reversal on judicial review.

“Dwelling” for Home-Occupation Permits Must Independently Qualify as an Allowed Category of Dwelling in the Zone – Friends of Yamhill County v. Yamhill County (373 Or 790)