Can you claim an SDLT refund because a property was uninhabitable at purchase?

Introduction

Buyers sometimes ask whether they can reclaim Stamp Duty Land Tax (SDLT) if a property was in very poor condition when they bought it. This usually comes up where the dwelling had serious defects such as electrical safety problems, roof leaks, mould, damp, or other disrepair, and substantial works were needed before anyone could live there safely.

The key issue is whether the property was truly not suitable for use as a dwelling at the effective date of the transaction. That is a narrow test. In recent years, the courts have made clear that the threshold is relatively high, and many properties needing major repairs will still count as residential for SDLT purposes.

The Question

A buyer purchased two low-value residential properties and later asked whether either purchase could support an SDLT refund claim on the basis that the properties were uninhabitable when acquired. The evidence said the properties had significant defects, including electrical issues, roof leaks, mould and damp, and that remedial works were later carried out so that the houses became safe and habitable.

The question is whether those facts are enough to show that the properties were not suitable for use as dwellings at completion, so that the residential SDLT rules should not have applied in the usual way.

Nick’s Explanation

Nick’s response was that, in cases like this, the starting point is to explain the effect of the Mudan litigation and the appeal position before deciding whether a claim is worth pursuing.

In anonymised form, his point was essentially this: where a buyer says a property was uninhabitable, the claim has to be considered against the current case law, and the present legal position is restrictive. If the facts do not clearly meet the legal test, the case may need to be held back unless there is a change in the law.

That approach reflects the reality that poor condition alone is not enough. The question is not simply whether the property was unpleasant, unsafe in some respects, or in need of extensive work. The real question is whether, as at the purchase date, it was objectively unsuitable for use as a dwelling within the meaning of the SDLT legislation.

The Law

SDLT on land transactions is governed by Finance Act 2003. Whether a building is residential property depends in part on whether it is used or suitable for use as a dwelling.

The legislation is found principally in Schedule 4ZA to Finance Act 2003 and related SDLT provisions dealing with residential property. In broad terms, if a building is suitable for use as a dwelling at the effective date of the transaction, it is treated as residential property for SDLT purposes.

Buyers have sometimes argued that a property in severe disrepair was not suitable for use as a dwelling, with the result that it should not be taxed as residential property. HMRC has generally taken a narrow view of those arguments, and the courts have increasingly supported that narrow approach.

A key authority is Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. Following that decision, the condition threshold in uninhabitable or not suitable for use cases is now relatively high. A property does not cease to be a dwelling merely because it needs repair, modernisation, or even substantial remedial works. The test is demanding and focuses on the condition of the property at the effective date of the transaction.

Analysis

The analysis usually proceeds in the following steps.

First, identify the exact condition of the property on completion. Evidence may include photographs, survey reports, invoices, certificates, correspondence, and completion documents. The condition must be assessed as it stood at the effective date of the transaction, not after works were carried out.

Second, separate serious disrepair from true unsuitability for use as a dwelling. A property may have leaking roofs, mould, damp, defective wiring, outdated services, or health and safety concerns, yet still remain a dwelling in law. Many houses are bought in poor condition for renovation; that does not automatically take them outside the residential SDLT rules.

Third, ask whether the defects meant that the building could not realistically be used as a dwelling at all. The courts have treated this as a high bar. The fact that works were later needed to make the property safe, compliant, or more comfortable does not by itself prove that it was not suitable for use as a dwelling when purchased.

Fourth, consider the significance of post-completion works. Evidence that electrical works were completed later, or that leaks and damp were rectified, may show the property needed improvement or repair. But it may also suggest that the property was capable of being restored rather than that it had ceased to be a dwelling at the point of purchase. Later works do not automatically establish the legal test.

Fifth, apply the current case law. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the courts have confirmed that the threshold is relatively high in these cases. A taxpayer therefore needs unusually strong evidence that the property was genuinely not suitable for use as a dwelling, rather than simply in a poor or unsafe condition.

On facts involving roof leaks, mould, damp and electrical defects, the outcome will depend on severity, but many such cases are now difficult. Unless the evidence shows an extreme level of disrepair going beyond ordinary or even major refurbishment, a refund claim is unlikely to succeed.

Outcome

The practical conclusion is that a property in bad condition will not necessarily qualify for SDLT refund treatment on the basis that it was uninhabitable. After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the legal threshold is relatively high, and many claims based on disrepair, damp, leaks, or electrical problems will fail unless the facts are exceptional.

In a case where the properties were later made safe and habitable through repairs and electrical works, that may show serious defects, but it does not by itself show that the buildings were not suitable for use as dwellings at the purchase date.

Practical Steps

If you are assessing a possible claim, the next steps are:

• Gather evidence showing the exact condition of the property on the effective date of the transaction.
• Obtain any survey, valuation, contractor, or structural evidence that addresses whether the property was capable of use as a dwelling at that date.
• Review completion documents, photographs, invoices, certificates, and any pre-purchase reports.
• Focus on whether the defects prevented residential use altogether, not merely whether the property needed major repairs.
• Compare the facts carefully against the reasoning in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.
• Be realistic about litigation risk, because the current legal position is demanding for taxpayers in uninhabitable property cases.

Conclusion

A claim that a property was uninhabitable for SDLT purposes is now hard to establish. Serious disrepair, even where expensive remedial works are needed, may still leave the property classed as residential. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the condition threshold is relatively high, so any claim needs strong contemporaneous evidence showing the dwelling was truly not suitable for use as a dwelling at completion.

Legal References Used

• Finance Act 2003
• Schedule 4ZA, Finance Act 2003
• 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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