Can you claim a Stamp Duty refund if a property was uninhabitable when you bought it?

Introduction

Many buyers ask whether a property in very poor condition should be treated as non-residential for Stamp Duty Land Tax (SDLT) purposes. The issue usually comes up where a buyer paid SDLT at residential rates, sometimes including the higher rates for additional dwellings, and later wonders whether the property was too damaged or unsafe to count as a dwelling at all.

This area has been heavily litigated. The courts have now made clear that the legal test is not simply whether the property was comfortable, modern, or immediately fit to move into. In an uninhabitable or not suitable for use case, the condition thresholds are now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

The Question

A buyer purchased a residential-looking property and is considering whether they can reclaim SDLT on the basis that, at the effective date of the transaction, the building was in such poor condition that it was not “suitable for use as a dwelling”. The buyer wants to know whether it is sensible to proceed now, whether an appeal or later court decision could affect the position, and how the four-year time limit for making an SDLT amendment or repayment claim fits in.

Nick’s Explanation

Nick’s core explanation can be summarised like this:

• If a property truly is not suitable for use as a dwelling because of its condition, it may fall to be treated as non-residential for SDLT purposes.
• However, the courts have drawn the line quite narrowly.
• Repairs, even serious repairs, do not necessarily stop a building being a dwelling.
• The strongest cases are those where the building lacks the essential character of a dwelling or where it cannot realistically be reused and must be demolished.

In anonymised form, Nick’s explanation was that the Upper Tribunal had taken the view that if a building “cannot be reused and must be demolished, it is not suitable for use as a dwelling”, but that ordinary disrepair claims were much weaker. He also highlighted the practical importance of the four-year claim window, especially for purchases approaching the deadline.

He further noted that HMRC is likely to resist claims based only on poor condition and may scrutinise claims that overstate the legal effect of disrepair.

The Law

The starting point is the SDLT code in the Finance Act 2003. Whether property is residential or non-residential matters because different rate structures apply.

Section 116 Finance Act 2003 contains the key definition of “residential property”. Broadly, property is residential if it consists of or includes:

• a building that is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for such use;
• land that forms part of the garden or grounds of such a building; or
• an interest or right over land that subsists for the benefit of such a building or land.

The difficult words are “suitable for use as a dwelling”. The case law shows that this is not a simple “could someone sleep there tonight?” test. The courts look at the property’s objective character at the effective date of the transaction.

Relevant authorities include Fiander and Brower v HMRC and, more recently, Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. The later appellate guidance is particularly important because it raises the threshold for taxpayers arguing that disrepair made a property non-residential.

Analysis

To work out whether a refund claim is realistic, it helps to go through the issue step by step.

First, identify the legal question correctly. The question is not whether the property was attractive, mortgageable, or ready for immediate occupation. The question is whether, viewed objectively at completion, it was suitable for use as a dwelling within section 116 Finance Act 2003.

Second, look at the building’s inherent characteristics. A property may still be a dwelling even if it has major defects, outdated services, damp, broken heating, unsafe electrics, plumbing problems, or a leaking roof. If it still retains the basic character of a house or flat, that usually points towards residential treatment.

Third, consider whether the defects go beyond disrepair and into loss of dwelling character. Examples that may matter include the absence of basic facilities, severe structural failure, or a condition so extreme that the building cannot sensibly be lived in or reused as a dwelling without reconstruction. Even then, the courts have shown that the threshold is demanding.

Fourth, ask whether demolition is effectively required. Nick’s summary reflected the stronger line of authority that where a building cannot realistically be reused and must be demolished, it is more likely to fall outside “suitable for use as a dwelling”. That said, this is a fact-sensitive question and should not be assumed merely because major works were later carried out.

Fifth, apply the current appellate guidance. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold in uninhabitable or unsuitable-for-use cases is now relatively high. The courts have made clear that immediate habitability is not the same as legal suitability for use as a dwelling. A property can be unfit for normal occupation in a practical sense and still count as residential property for SDLT.

Sixth, evidence matters. A buyer would need contemporaneous material showing the condition at the effective date, not just after works began. Useful evidence may include:

• survey reports prepared for the purchase;
• photographs and videos from the time of completion;
• engineer or contractor reports;
• demolition assessments, if relevant;
• planning documents showing intended demolition or rebuilding;
• completion statements and SDLT return details.

Seventh, timing matters. There is normally a four-year window for correcting an SDLT return or seeking repayment. A buyer close to that deadline may need to decide whether to submit a protective claim so that the position does not become time-barred while the law develops.

Eighth, risk matters. HMRC has challenged many uninhabitable property claims. If a claim is weak or based on an overstatement of the law, HMRC may refuse it and may look closely at how the return or amendment was prepared.

Outcome

The practical conclusion is that most properties in poor repair will still be treated as residential for SDLT. A claim is more likely to succeed only where the building lacked the essential nature of a dwelling or was in such extreme condition that it could not realistically be reused and would need demolition.

After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, buyers should assume that the bar is high. Ordinary uninhabitability in the everyday sense is not enough on its own.

Practical Steps

If you are assessing a possible SDLT reclaim, the sensible next steps are:

1. Check the effective date of the transaction and calculate whether you are still within the four-year claim window.
2. Gather contemporaneous evidence of the property’s condition at completion.
3. Review whether the defects were repair issues or whether they went to the building’s basic character as a dwelling.
4. Consider whether there is genuine evidence that the building could not be reused and required demolition.
5. Compare the facts carefully against the reasoning in Fiander and Brower v HMRC and Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.
6. If the deadline is approaching, consider whether a protective claim is needed before time expires.
7. Make sure any claim is framed accurately and supported by evidence, rather than relying on a broad statement that the property was “uninhabitable”.

Conclusion

A property does not become non-residential for SDLT just because it needed substantial work. The present legal position is stricter than many buyers expect. Unless the condition was so extreme that the building had ceased to be suitable for use as a dwelling in the legal sense, residential SDLT treatment is likely to remain correct.

Legal References Used

• Finance Act 2003, section 116
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799
• Fiander and Brower v HMRC

This page was last updated on 22 March 2026.

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