Can you claim an SDLT refund because a property was uninhabitable when you bought it?

Introduction

Buyers sometimes ask whether they can recover Stamp Duty Land Tax (SDLT) if the property they bought needed major repairs and could not realistically be lived in at completion. This usually comes up where the building had serious damp, roof defects, leaks, failed windows, or outdated kitchen and bathroom facilities.

The difficulty is that the legal test for an “uninhabitable” dwelling is now strict. A property does not become non-residential for SDLT purposes just because it is in poor condition, needs extensive renovation, or requires a large amount of money to make it comfortable. The key question is whether, at the effective date of the transaction, it was suitable for use as a dwelling.

Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the condition thresholds are now relatively high in uninhabitable or not suitable for use cases.

The Question

A buyer purchased a house for a modest price and later carried out extensive works. The works included a replacement roof, replacement windows and doors, a new kitchen and bathroom, a new boiler and heating system, and repairs for damp and leak damage. A pre-purchase survey recorded visible roof defects, signs of water ingress, dampness in several areas, damaged internal finishes, and windows said to be beyond reasonable repair.

The buyer wanted to know whether those defects meant the property was not suitable for use as a dwelling at completion, so that the SDLT paid on the basis of a residential purchase might be reclaimable.

Nick’s Explanation

Nick’s view was cautious. In anonymised terms, his position was that cases of this kind depend heavily on the evidence and on the current state of the law. He indicated that where there is an important appeal or developing authority on the meaning of “unsuitable for use as a dwelling”, it may be sensible to gather evidence first and assess the claim once the legal position becomes clearer.

That approach reflects the reality of these cases. A survey showing disrepair, damp, leaks, and the need for major works may help, but it does not automatically prove that the building was legally uninhabitable. The evidence must show more than serious deterioration. It must support the conclusion that the property was not suitable for use as a dwelling at the relevant date.

The Law

SDLT is charged under the Finance Act 2003. Whether the residential rates apply depends in part on whether the subject matter of the transaction includes a “dwelling”.

The key provision is Schedule 4ZA to the Finance Act 2003, which uses the concept of 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.

In broad terms:

• if the property is a dwelling, residential SDLT treatment normally applies;
• if it is not suitable for use as a dwelling at the effective date, it may fall outside residential treatment; and
• the test is applied to the actual condition of the property at completion, not to what the buyer plans to do afterwards.

Case law has made clear that this is an objective test. The tribunal or court asks whether the building, as it stood on completion, was suitable for use as a dwelling. It is not enough that the buyer intended a full refurbishment, or that the property was unpleasant, outdated, or expensive to repair.

The recent Court of Appeal decision in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 is especially important. It confirms that the threshold is relatively high. Serious defects, substantial disrepair, and the need for major renovation will not necessarily prevent a property from being a dwelling for SDLT purposes.

Analysis

In a case like this, the analysis usually proceeds in stages.

First, look at the condition of the property on the completion date. Evidence from a survey is relevant, especially if it identifies structural failure, unsafe conditions, lack of basic services, or conditions that make occupation unrealistic.

Secondly, separate disrepair from true unsuitability. A property may have:

• a poor roof;
• water staining and leaks;
• damp;
• failed windows;
• an old or defective kitchen and bathroom; and
• a need for wholesale modernisation.

Even so, it may still be suitable for use as a dwelling if it retains the basic character and functionality of a home.

Thirdly, ask whether the defects deprived the building of the essentials of residential occupation. Relevant points often include:

• whether there was a functioning kitchen;
• whether there was a usable bathroom or toilet;
• whether the structure was fundamentally unsafe;
• whether the property was wind and watertight;
• whether utilities were connected and capable of use; and
• whether occupation would have been impossible, not merely inconvenient or undesirable.

In the scenario described, the property still appears to have contained a kitchen and bathroom, albeit in disrepair. The survey extracts point to significant defects, but on their face they read more like evidence of a house in poor condition than conclusive evidence of a building that had ceased to be a dwelling altogether.

A failing roof, dampness, leaks, damaged finishes, and windows beyond economic repair are all serious matters. But after Mudan, the court is likely to require a stronger factual basis before concluding that the property was not suitable for use as a dwelling. For example, stronger cases often involve extreme structural instability, complete absence of basic facilities, severe contamination, or conditions making lawful or safe occupation effectively impossible.

Fourthly, the cost of repairs is not the legal test. A buyer may spend a large sum replacing the roof, windows, heating, kitchen, and bathroom, but that does not by itself show the SDLT treatment at completion was wrong.

Fifthly, the buyer’s future renovation plans are not decisive. SDLT is assessed by reference to the state of the property at the effective date of the transaction.

Outcome

On facts of this kind, an SDLT refund claim based on the property being uninhabitable is possible to explore, but it is far from straightforward. A survey showing extensive disrepair does not automatically establish that the property was not suitable for use as a dwelling.

Given the high threshold now reinforced by Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, many properties needing major refurbishment will still be treated as dwellings for SDLT purposes.

In practical terms, unless the evidence shows that the property lacked the essential characteristics of a dwelling or was truly incapable of residential occupation at completion, a refund claim is likely to face difficulty.

Practical Steps

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

• obtain the full pre-purchase survey, not just selected extracts;
• identify the exact condition of the property on completion, including photographs, contractor reports, and utility information;
• check whether the kitchen, bathroom, water, electricity, heating, and weatherproofing were still functional or at least usable;
• separate evidence of disrepair from evidence of actual unsuitability for occupation;
• review the completion date carefully, because the legal test is applied at that date;
• consider the impact of Mudan and other SDLT suitability cases before submitting a reclaim; and
• if a reclaim has already been made or is being considered, make sure the evidence directly addresses suitability for use as a dwelling, not just the scale of the refurbishment.

Conclusion

A house can be in very poor condition and still count as a dwelling for SDLT. The question is not whether it needed major work, but whether it was suitable for use as a dwelling at completion. After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold for showing unsuitability is relatively high, so claims based only on extensive disrepair should be approached with care.

Legal References Used

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