Can you claim SDLT relief if a buy-to-let property was in poor condition or not suitable for use?

Introduction

Many buyers ask whether Stamp Duty Land Tax (SDLT) can be reduced or reclaimed where a property was in very poor condition when it was bought. This usually comes up where the buyer purchased a flat or house to refurbish, found serious defects, and later carried out extensive works before letting it out or occupying it.

The key issue is whether the property was genuinely “not suitable for use as a dwelling” on the effective date of the transaction. That test matters because, if a building is not suitable for use as a dwelling at completion, it may fall outside the normal residential SDLT rules. However, the legal threshold is now relatively high, especially following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

The Question

A buyer acquired a residential property as an investment. At the time of purchase, the property had several defects and was said to be in a poor state of repair. The reported issues included sewage or waste-water backing up through bathroom and kitchen facilities, mould in the bathroom, uneven flooring, a broken bathroom window, defective electrics, and blocked drains. The heating system was old, and substantial renovation works were later carried out, including replacing the bathroom, drainage-related works, a new boiler and heating system, a new kitchen, rewiring, new floor coverings, redecoration, and external repairs.

The practical question is whether those facts are enough to show that the property was not suitable for use as a dwelling for SDLT purposes, so that a refund or reduction of SDLT may be available.

Nick’s Explanation

Nick’s reasoning, put into public-facing form, is that the existence of serious disrepair and the need for substantial refurbishment do not automatically mean a property was not suitable for use as a dwelling at the time of purchase.

In summary, his explanation is that the SDLT test is concerned with the condition of the property on completion, not with how much money was later spent on works. A buyer may install a new kitchen, bathroom, boiler, wiring and flooring, but that does not by itself prove the dwelling was unsuitable for use when acquired.

Nick’s view can be summarised like this: the strongest points in this sort of case are defects affecting basic living functions, especially sanitation, drainage, and safety. If sewage backed up into the bath or kitchen sink, and bathroom facilities could not be used properly, those facts may support an argument that the property was not suitable for normal residential use. But the full picture still matters, and the threshold is not met simply because the property was unpleasant, outdated, mouldy, or in need of modernisation.

He would also be looking for evidence such as drainage reports, contractor evidence, photos, survey material, and anything showing the condition at the date of purchase rather than after works had begun.

The Law

SDLT is charged under the Finance Act 2003. Whether property is residential depends on the statutory definition of “residential property” in section 116 Finance Act 2003.

Broadly, a building is residential property if it is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for such use. If a building is not suitable for use as a dwelling at the effective date of the transaction, that can affect the SDLT treatment.

The question of suitability for use as a dwelling has been considered in case law. The courts have made clear that the test is applied to the property as it stood at the relevant date, and that the bar is fairly high. A property does not cease to be residential merely because it is run-down, requires repairs, lacks modern fittings, or is inconvenient to occupy.

That position is now especially important in light of Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, which confirms that the condition thresholds in “uninhabitable” or “not suitable for use” cases are relatively high. In practice, buyers need to show more than serious disrepair or a need for refurbishment. The defects must go to the property’s real suitability for use as a dwelling at the time of completion.

Analysis

The right way to analyse this type of SDLT question is step by step.

First, identify the legal test. The issue is not whether the property was attractive, mortgageable, or in good condition. The issue is whether it was suitable for use as a dwelling on the effective date of the transaction.

Second, separate ordinary disrepair from fundamental failure. The following points usually do not carry enough weight on their own:

• old kitchen or bathroom fittings;
• dated décor;
• worn carpets or flooring;
• an old boiler that still functioned, or was merely near the end of its useful life;
• mould, unless it was so severe that occupation was realistically impossible;
• the fact that the buyer later chose to carry out a full refurbishment.

Third, focus on defects affecting basic habitation. The more significant points in this scenario are the reported drainage and sanitation problems, including waste backing up into the bath and sewage backing up into the kitchen sink. If those facts are supported by reliable evidence and show that essential washing, toilet or kitchen drainage facilities could not be used in a normal way, they may point towards the property not being suitable for use as a dwelling.

Fourth, consider whether the defects were temporary, localised, or remediable without preventing occupation. A blocked drain or defective waste system may be serious, but HMRC and the courts may still ask whether the problem was capable of relatively prompt repair while the property remained basically a dwelling. The fact that a specialist drainage firm later cleared the pipes may cut both ways: it helps show there was a real problem, but it may also suggest the issue was repairable rather than evidence that the property had ceased to be a dwelling altogether.

Fifth, look at the whole property. Uneven floors, a broken window, poor electrics, mould, and a tired heating system add to the overall picture, but the court will usually assess all defects cumulatively. Even taken together, they must show that the property crossed the relatively high threshold for unsuitability.

Sixth, consider the evidence available from the purchase date. Strong cases usually need:

• contemporaneous photographs or video;
• a survey, snagging report, or contractor report prepared at or near completion;
• drainage or plumbing reports confirming sewage backflow or failure of sanitary systems;
• invoices and work descriptions showing what had to be remedied;
• any evidence that the facilities could not lawfully or practically be used as normal living accommodation.

Seventh, apply the post-Mudan approach. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, it is important not to assume that extensive works or unpleasant living conditions are enough. The threshold is now relatively high. The question is whether the property had, in substance, lost the characteristics of a dwelling at completion, not whether it was a poor or undesirable one.

Outcome

On these facts, there is at least an arguable point because the reported drainage and sewage backflow issues affect basic sanitation and ordinary occupation. That is stronger than a case based only on dated fittings or general disrepair.

However, the case is far from straightforward. A poor state of repair, mould, old services, broken glazing, and the need for a full refurbishment will not by themselves establish that the property was not suitable for use as a dwelling. Given the relatively high threshold now confirmed by Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, success would depend heavily on proving that the sanitation and drainage failures were so serious, and so present at completion, that the property was not realistically suitable for residential use at that time.

Practical Steps

If you are assessing a similar SDLT position, the sensible next steps are:

• gather all evidence showing the property’s condition on the completion date;
• obtain surveyor, drainage, plumbing or contractor evidence that explains the seriousness of the defects;
• separate essential remedial works from improvement or modernisation works;
• identify whether bathrooms, kitchen drainage, heating, water, electrics and sanitation were actually usable at completion;
• review the SDLT return originally filed and the basis on which residential rates were applied;
• consider the claim in light of the current case law, especially the high threshold confirmed in Mudan.

It is also important to build the analysis around the legal test rather than the size of the refurbishment bill. Large expenditure after purchase does not, by itself, prove that the property was not suitable for use as a dwelling when bought.

Conclusion

A property in bad condition is not automatically “uninhabitable” for SDLT purposes. The legal question is whether it was suitable for use as a dwelling at the date of completion. Serious sanitation and drainage failures may support that argument, but the threshold is relatively high, and after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 a claimant will need strong, contemporaneous evidence to show that the property had genuinely crossed the line from disrepair into non-suitability for residential use.

Legal References Used

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

This page was last updated on 22 March 2026.

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