Originally published in Oregon Wine Press, March 2008.
It's all in the details when purchasing property in wine country.
Ever thought about building your dream home out in the middle of a vineyard in wine county? Curious about buying vineyard property, but worried that you may not be able to build the desired family home? Or what if you run across a nice piece of property, and it has a dilapidated old farmhouse that's just not suited to your taste?
These are common questions people may face when buying vineyard property in Oregon. When purchasing property for vineyard development or a planted vineyard, there are many factors to take into account before signing on the dotted line, but a key, although often overlooked issue, is whether applicable state and county land use regulations allow the construction and year-round use of a permanent residence.
With all the talk in Oregon about Measure 37 and Measure 49, there is no doubt that Oregon has a unique land use scheme for protecting farmland. State land use regulations impose restrictions on development of farmland (and forestland, too), which are then implemented at the local level through local land use and zoning codes.
The first step when considering the purchase of a property for vineyard use is whether it is permitted. Planting or operating a vineyard is generally allowed outright in Oregon on lands zoned for agricultural use. Such zones may include the exclusive farm-use (EFU) zone, the Agricultural/Forestry Large Holding (AF) zone, Agricultural/Forestry Small Holding zone or other mixed-farm/forest zone, depending on the particular local jurisdiction.
The second consideration is whether the subject zone allows for the construction of a new residential dwelling. Generally speaking, local jurisdictions' land use regulations protect farmland and impose relatively similar restrictions on development, although it is essential to check with your local jurisdiction's planning department when you have identified a particular parcel of interest. The zoning, size of your parcel and whether it is considered high-value farmland are important factors to consider when purchasing vineyard property with the intent of building a home.
Oregon land use laws do not generally allow construction of a new residential dwelling on EFU or other large holding agriculturally zoned parcels unless one of several tests can be met. If your property is located within this type of zone, it likely will be necessary to demonstrate that you meet one of the required tests before receiving land use approval for a dwelling. Generally the tests can be characterized as the large parcel test (when you have a parcel of 160 acres or more), the gross income test, the study-area or template test, and the principal lot-of-record test. Oregon Administrative Code (OAR) 660-033-0135 contains the specific state-level test requirements, which are then incorporated into local codes and zoning ordinances. The selection of the suitable test and putting together the necessary "evidence" to demonstrate that each element is satisfied is often a complex and burdensome process. It is critical to understand the details of each test and to select the one that you have the best chance to meet.
Regardless of the test used, each generally requires that the proposed dwelling be in conjunction with the vineyard use and the person occupying the dwelling must be principally involved in that use. Then, depending on which test is used, additional information will be needed. To site a dwelling under the gross income test, a property owner is obligated to demonstrate that a vineyard on high-value farmland has produced at least $80,000 in annual gross income over the past two years, or alternatively $80,000 in annual gross income over three of the past five years. If the vineyard is on non-high-value farmland, then the hurdle is somewhat lower, and the property owner only needs to demonstrate that the vineyard has produced at least $40,000 over the past two years, or three of the past five years. Whether the property is high-value farmland depends on the class and character of the soil. It is important to note that this test is satisfied only using past income; future or expected income is not considered. So if you are considering purchasing raw land or a newly planted vineyard, it may be necessary to wait at least two years before you are able to file an application for a dwelling.
The process is somewhat easier when you are dealing with zones like the small holding agricultural or acreage residential zone. An example of this type of zone would be the AF-10 in Yamhill County or the AR-10 in Polk County. In these types of zones, it is not necessary to meet a gross income test. Instead, a principal dwelling is generally permitted outright as long as the applicable development standards are satisfied. It is important to pay attention to the zone's minimum lot size, which typically ranges from five to 10 acres, depending on the zone and jurisdiction.
If your newly acquired property has a dilapidated house, you may be in luck! There is almost always the ability to restore or replace a lawfully established dwelling as long as you can meet certain criteria (i.e. the dwelling has intact walls and roof, indoor plumbing and electricity, and a heating system). In some instances, a mobile home also may qualify for a replacement dwelling. There may be geographic limits on where the replacement dwelling can be located on the property, although few jurisdictions require that the replacement dwelling be on the same footprint as the original. Normally the replacement dwelling avenue is a way for the property owner to short-cut the longer process for permitting a new dwelling when an existing dwelling is already on the property. This consideration may save time and money in the long run.
Although the general land use scheme for agricultural land in Oregon is similar, always, when you identify that perfect parcel, be sure to check with the local jurisdiction's land use regulations to confirm that siting a dwelling is feasible in the particular zone. Other factors to think about before purchasing vineyard property include whether the property is actually a legal lot, whether it is suitable for a septic system, what is the source of water and is it located in a groundwater restricted area.
While building in wine country can be a dream come true for many, it is important to take certain precautionary steps in order to avoid the nightmare scenario of discovering after closing that your new property cannot be used for residential use.