Where the association lost

On the express duty of good faith in section 5.4 of the declaration. This was the second time the case reached the Court of Appeals; in Santoro I, 319 Or App 793 (2022), the court had already held that section 5.4 imposed a good-faith duty and that the trial court applied the wrong standard by asking only whether the committee acted in bad faith. On remand the trial court found the committee acted in good faith and again ruled for the association.

The court's response was blunt: “As we tried to make abundantly clear in Santoro I, the duty of good faith requires that parties act in an objectively reasonable manner in the performance and enforcement of their contracts.”

It anchored that in Best v. U.S. National Bank, 303 Or 557, 563 (1987): “When one party to a contract is given discretion in the performance of some aspect of the contract, the parties ordinarily contemplate that that discretion will be exercised for particular purposes. If the discretion is exercised for purposes not contemplated by the parties, the party exercising discretion has performed in bad faith.”

The sentence that reaches every Oregon board

“That analysis fails to account for the reasonable expectation, arising from the CC&Rs, that homeowners would be able to park RVs in enclosed garages. As a matter of law, in light of the CC&R provisions, the committee's discretion had to be exercised consistently with that expectation. … The committee may have rejected plaintiffs' construction plans to promote a certain aesthetic, and may have done so in all honesty, but, as a matter of law, defendant's promise to act in good faith precluded it from exercising that authority to effectively ban construction of a garage that plaintiffs had an objectively reasonable expectation they could build. Applying the law correctly to the undisputed facts, the only conclusion a factfinder could reach is that, in denying plaintiffs' construction request because their design provided for an RV-size door, defendant breached its contract with plaintiffs.”¹

“May have done so in all honesty” is the phrase that matters. Subjective good faith did not save the decision. The court reversed and remanded “for entry of judgment in favor of plaintiffs.”

What this changes at the category level

An Oregon architectural committee's aesthetic discretion is bounded by the rest of the declaration it operates under. Where the declaration affirmatively contemplates a use, design review may not be exercised so as to make that use practically impossible.

This is the first Oregon appellate decision to apply the Best reasonable-expectations framework to an association's architectural-review denial, and to direct entry of judgment for the owner as a matter of law rather than remanding for further factfinding.

Note how the court framed the parties as “arguing past each other.” The owners were not contending the committee had to approve every RV garage: “Rather, plaintiffs argue, they reasonably expected that they would be permitted to construct an RV garage of some design.” The committee never engaged with that question, and the court noted it: “Neither defendant nor the trial court address the question of whether the CC&Rs give rise to a reasonable expectation that the committee's review function will not be exercised to effectively preclude all RV garages.”

What an Oregon committee should take from it

Read the whole declaration before denying. A committee operating only from its own design standards, without asking what the rest of the document permits owners to expect, is exercising discretion in a vacuum. The specific pattern to avoid is a standard that formally allows a category of construction while setting a dimension, material or placement limit that no example of that category can meet.

And document the alternative. The committee here required an eight-foot door; it does not appear to have engaged with whether some RV garage design would have been acceptable. A denial that identifies what would be approved is both better practice and, on this reasoning, better evidence.

Footnote 1 of the opinion expressly reserves a question worth watching: whether evidence that the committee approved other owners' garages is admissible to establish reasonable expectations. That is a live issue on remand.

Our Oregon architectural review page sets out the framework this decision now sits on top of.

What to watch next

Two things. The remedy on remand, which the court left open. And the interaction with Senate Bill 1551, in force since June 5, 2026, which requires that a denial of a fire-hardening application be delivered within 90 days, demonstrate “in reasonable detail the basis for the denial and the scope of any necessary modifications,” and not be arbitrary or capricious. Santoro and the statute are pushing the same way from different directions: an Oregon architectural denial now has to be reasoned, and its reasoning has to survive review against the declaration as a whole.

As of the most recent published disposition list, no petition for review in docket A184113 has been allowed or denied.