Can you claim SDLT refund for an uninhabitable buy-to-let if repairs were delayed by a tenant?

Introduction

Buyers sometimes ask whether they paid too much Stamp Duty Land Tax (SDLT) because a property was in very poor condition when they bought it. A common example is a rented house that needed major work, but where repairs were delayed because the tenant would not cooperate or had to be evicted first.

The key issue is whether the property was truly not suitable for use as a dwelling on the effective date of the transaction. That is a strict test. It is not enough that the property was run down, in need of modernisation, or expensive to repair. The legal threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

The Question

A landlord bought a residential property at a relatively low price. The property was occupied by a tenant at the time of purchase and was said to be in poor condition, with issues recorded in inspection material and photographs. The buyer intended to carry out substantial works to make the house safe and bring it up to a better standard.

After completion, access for builders was difficult because the tenant would not cooperate, rent arrears arose, and possession proceedings were later started. The works were therefore completed in stages over many months rather than immediately. The buyer gathered purchase documents, inspection reports, photographs, later correspondence from housing or accreditation officers, and a list of works eventually carried out. The question is whether that evidence could support an SDLT reclaim on the basis that the property was uninhabitable when bought.

Nick’s Explanation

Nick’s explanation can be summarised in this way: the fact that a property was very run down, required extensive repairs, or was improved significantly after purchase does not by itself prove that it was not suitable for use as a dwelling for SDLT purposes.

The important question is the condition of the property at completion. Evidence created later can help show what the earlier condition was, but it must point to a high level of disrepair or defect. Delays caused by a sitting tenant may explain why works were not done straight away, but those delays do not themselves establish that the dwelling was uninhabitable at the point of purchase.

In anonymised form, Nick’s practical point was that third-party evidence such as inspection reports, photographs, and records of the work done may still be useful, especially where there is no formal survey. But the evidence must show more than neglect or poor presentation. It must support the conclusion that the property could not properly be used as a dwelling when acquired.

The Law

SDLT on residential property is charged under the Finance Act 2003. Whether a property is “residential property” depends in part on whether 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.

The key statutory provision is section 116 of the Finance Act 2003. Broadly, if a building is suitable for use as a dwelling at the effective date of the transaction, it is residential property for SDLT purposes. If it is not suitable for use as a dwelling, different SDLT treatment may be argued depending on the facts and the structure of the transaction.

The courts have repeatedly said that “suitable for use as a dwelling” is an objective test applied at the effective date of the transaction. The question is not whether the buyer intended to refurbish it, whether it was attractive to live in, or whether it met the buyer’s preferred standard.

Recent authority has made clear that the threshold for showing unsuitability is high. In particular, Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 establishes that a property will not fall outside residential treatment merely because it is in poor condition or requires substantial works. The defects must be serious enough that the property is not suitable for use as a dwelling at all.

Analysis

There are several steps in analysing a case like this.

First, identify the exact condition of the property on the completion date. That is the critical date for SDLT. Evidence from before and after completion may be relevant, but only so far as it helps show the true condition at that point.

Second, separate disrepair from legal unsuitability. A property may have damp, an old kitchen, missing fittings, outdated electrics, poor decoration, rubbish, worn flooring, or general neglect, and still remain suitable for use as a dwelling. Even fairly serious repair needs do not automatically cross the line.

Third, look at whether essential living functions were actually absent or unsafe to the point that occupation as a dwelling was not realistic. Typical questions include whether there was a functioning kitchen, usable bathroom, water, electricity, sanitation, weatherproofing, and basic safety. A dwelling does not need to be attractive or modern, but it usually must still be capable of ordinary residential use.

Fourth, consider the significance of the sitting tenant. If the property was occupied by a tenant at completion, that fact may itself make an uninhabitability argument harder. Actual occupation is not conclusive, because a person can remain in poor or unsafe accommodation, but it is often strong evidence that the building was still capable of residential use. If the tenant was living there and the dispute was mainly about access, rent arrears, and timing of works, HMRC is likely to argue that the property was still a dwelling.

Fifth, consider the later repair history carefully. Extensive works after purchase can support the buyer’s account of serious defects, but they can also suggest only that the property was improved, modernised, or brought up to a better rental standard. The fact that the property looked completely different after works does not answer the SDLT question. Many habitable properties are heavily refurbished.

Sixth, assess the quality of the evidence. In the absence of a survey, third-party inspection reports, dated photographs, contractor records, local authority or accreditation correspondence, and a detailed schedule of works can all be useful. But the evidence needs to show what was wrong at completion and why those defects meant the property was not suitable for use as a dwelling. If the documents mainly show that work was desirable, delayed, or partly outstanding, that may not be enough.

Seventh, apply the higher threshold confirmed by Mudan. 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. That means a claim based on general dilapidation, a poor-quality tenancy, delayed access, or substantial refurbishment is less likely to succeed unless the evidence clearly shows that the building could not function as a dwelling on completion.

Outcome

On facts of this kind, an SDLT reclaim is unlikely to succeed unless the evidence proves that the property was genuinely not suitable for use as a dwelling at the date of purchase.

If the property was tenanted and capable of occupation, even in poor condition, HMRC is likely to say it remained residential property. Delays in carrying out repairs because of tenant obstruction or eviction proceedings may explain the timeline, but they do not by themselves show uninhabitability.

A claim may still be arguable if the evidence shows very serious defects affecting basic residential use, but the standard is demanding and now reinforced by Mudan.

Practical Steps

If you are assessing a similar case, take these steps:

• Gather evidence that shows the property’s exact condition on the completion date, not just later.
• Focus on defects affecting basic use as a dwelling, such as sanitation, water, electricity, structural integrity, severe damp penetration, or inability to use essential rooms safely.
• Collect independent evidence where possible, including surveys, inspection reports, contractor opinions, and dated photographs.
• Prepare a clear timeline showing what was wrong at purchase, what works were done later, and why any delay occurred.
• Be realistic about the effect of actual occupation by a tenant, which may undermine an argument that the property was not suitable for use as a dwelling.
• Review the case against the current legal threshold, especially Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.
• Check whether the claim is still within the statutory amendment or repayment time limits.

Conclusion

A run-down rental property does not automatically qualify as uninhabitable for SDLT purposes. The legal test is whether it was suitable for use as a dwelling on completion, and that is now a relatively high threshold. Where repairs were delayed because of a tenant, that may explain the facts, but the success of any reclaim still depends on strong evidence that the property could not genuinely function as a dwelling when bought.

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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