Can asbestos make a property uninhabitable for SDLT non-residential rates?

Introduction

Buyers sometimes ask whether a poor-condition house can be treated as “not suitable for use as a dwelling” for Stamp Duty Land Tax purposes. This usually comes up where the property has serious defects such as asbestos, outdated services, poor insulation, old windows or general disrepair. The reason the question matters is that, in some cases, a property that is not suitable for use as a dwelling at the effective date of the transaction may fall outside the normal residential SDLT rules.

This is now a difficult area. The courts have taken a stricter approach, and the threshold for showing that a property was not suitable for use as a dwelling is relatively high, especially following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

The Question

A buyer was considering a claim on the basis that the property was in poor condition. The main concern was widespread asbestos, along with other issues such as an old boiler, worn carpets, limited insulation, single-glazed windows and old window frames. The buyer wanted to know whether those defects could support an SDLT argument that the property was uninhabitable or not suitable for use as a dwelling.

Nick’s Explanation

Nick’s core point was that claims based on a property being uninhabitable are not currently being accepted by HMRC in this kind of situation. In anonymised form, his explanation was:

“Essentially, claims for uninhabitable properties will not currently be paid by HMRC. However, there is a possibility that they will be paid in the future if the appeal proceeds.”

The practical message is that a buyer should be very cautious. Even where there is asbestos or other serious disrepair, that does not automatically mean the property was legally unsuitable for use as a dwelling at the relevant date. The question is not whether the buyer intended to renovate, or whether the property was dated, or whether works were advisable. The question is whether, at completion, the condition was so serious that the building was not suitable for use as a dwelling at all.

The Law

The starting point is the Finance Act 2003. SDLT applies differently depending on whether the subject matter of the transaction is residential property or non-residential property.

Section 116 Finance Act 2003 defines residential property. Broadly, property is residential if it consists 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;
• 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.

In disputes of this kind, the key issue is usually whether the building was “suitable for use as a dwelling” on the effective date of the transaction. That is a fact-sensitive legal test.

The case law has made clear that the test is objective. The tribunal or court looks at the actual condition of the property at the relevant date. It is not enough that the property needed repair, modernisation or even substantial renovation. Many properties are unpleasant, old-fashioned or expensive to repair, but are still legally suitable for use as dwellings.

The threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. That decision reinforces that “not suitable for use as a dwelling” is a narrow category. Serious defects do not necessarily take a property outside the residential rules if the building still retains the character and basic functionality of a dwelling.

Analysis

In a case involving asbestos and general disrepair, the analysis usually works as follows.

1. Identify the legal test

   The issue is not whether the property was attractive, mortgageable, modern or free from health concerns. The issue is whether it was suitable for use as a dwelling at the effective date.

2. Consider what asbestos actually means in context

   Asbestos can range from low-risk asbestos-containing materials left undisturbed, through to widespread damaged asbestos creating serious health and safety issues. The mere presence of asbestos in an older property does not by itself prove that the property was unsuitable for use as a dwelling. Many older dwellings contain asbestos somewhere in their structure or finishes.

3. Separate repair issues from habitability issues

   An old boiler, worn carpets, poor insulation, single glazing and old window frames are usually signs of age and disrepair, not necessarily signs that the building cannot function as a dwelling. These points may justify a reduced price or renovation works, but they do not usually meet the SDLT threshold on their own.

4. Ask whether the defects prevented normal residential occupation

   Relevant questions include whether the property had functioning basic services, whether it was structurally capable of occupation, whether it had usable sanitation and water, whether the asbestos risk was such that occupation was unsafe without immediate major remedial works, and whether any official prohibition or expert evidence showed that the building should not be occupied.

5. Apply the stricter post-Mudan approach

   Following Mudan, the courts are less likely to accept that a defective or run-down property falls outside the residential definition. The condition must usually be extreme. A property can be in very poor shape and still remain suitable for use as a dwelling in law.

6. Consider HMRC’s current stance

   HMRC has been resisting these claims. In practice, a claim based mainly on widespread asbestos and general dated condition is likely to face difficulty unless the evidence shows something much more serious than renovation need or health-and-safety concern in the abstract.

So, if the property was essentially an old house needing updating, even with significant asbestos present, the claim is unlikely to succeed unless the asbestos condition and related defects made occupation genuinely impossible or objectively unsuitable at completion.

Outcome

The practical conclusion is that widespread asbestos and other common defects in an older property will not automatically make it non-residential for SDLT purposes. In the current legal climate, such a claim is unlikely to succeed unless the facts are unusually severe and well evidenced. The condition threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

Practical Steps

If you are assessing whether a property may have been unsuitable for use as a dwelling, the sensible steps are:

• obtain the survey, asbestos report and any specialist contractor reports;
• identify the property’s exact condition at the effective date of the transaction, not after later strip-out works;
• check whether utilities, sanitation, heating and structural integrity were actually available and usable;
• look for any formal prohibition notices, dangerous structure findings or expert evidence stating that occupation was not appropriate;
• separate defects showing disrepair from defects showing true unsuitability for use as a dwelling;
• review the transaction against section 116 Finance Act 2003 and the current case law, especially Mudan;
• be realistic about HMRC’s present approach to these claims.

Where the evidence only shows that the property was dated, unattractive or expensive to refurbish, the safer view is usually that it remained residential property for SDLT purposes.

Conclusion

A house with asbestos and other age-related defects is not necessarily “uninhabitable” in SDLT law. The legal test is strict, HMRC is resisting these claims, and the bar is now relatively high after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. Most dated or defective homes will still be treated as residential unless the evidence shows a far more serious level of unsuitability.

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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