SDLT on two cottages where one is derelict
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Can you reclaim SDLT if one of two linked dwellings had no bathroom or running water?
Introduction
Buyers often ask whether Stamp Duty Land Tax (SDLT) can be reduced after completion where a property was in very poor condition at the date of purchase. The question becomes more complicated where two dwellings were bought together as linked transactions and one of them may not have been fit for use as a dwelling.
This matters because, in some cases, the purchase may potentially fall to be taxed at non-residential or mixed-use rates if at least one building was not suitable for use as a dwelling at the effective date of the transaction. In older cases, buyers also sometimes ask whether Multiple Dwellings Relief (MDR) was available. The correct answer depends heavily on timing, the condition of the building at completion, and the evidence.
The Question
A buyer purchased two adjoining dwellings under linked titles for a total price split between the two units. One side was said to have no running water and no bathroom. A structural report on the building described various defects, including a dipped ground floor, outward movement in brickwork, sloping floors, chimney cracking, water staining and a ceiling bulge, but also stated that there was no evidence of settlement or subsidence.
The buyer wanted to know whether there was scope to reduce SDLT already paid, either because the purchase involved more than one dwelling or because one of the dwellings may have been uninhabitable at the date of purchase.
Nick’s Explanation
Nick’s main point was that there were several possible routes, but each depended on facts that had to be pinned down carefully.
First, timing matters. If the purchase completed before the abolition of MDR for most transactions from 1 June 2024, MDR might need to be considered. If it completed after that date, MDR would usually not be available.
Second, the amount of SDLT originally paid matters. Nick explained in substance that if standard residential rates had been paid, there may be little scope for a saving unless MDR was available. But if the higher residential rates had been paid, it could be commercially worthwhile to examine whether one dwelling was not suitable for use as a dwelling, so that the linked purchase might instead be taxed at non-residential or mixed-use rates.
Nick also noted that the condition test has become harder to satisfy. In anonymised form, his view was that although the photographs suggested serious neglect and possible dereliction, the legal threshold for “uninhabitable” is now stricter than many buyers assume. A missing bathroom or lack of running water may be relevant, but those facts alone do not automatically decide the SDLT treatment.
His practical reasoning was that if the transactions were linked, and if at least one unit was genuinely not suitable for use as a dwelling at the effective date, the whole linked transaction might potentially be treated as mixed-use and taxed at non-residential rates. But that conclusion would depend on detailed evidence about the building’s actual condition at completion.
The Law
SDLT is charged under the Finance Act 2003. Whether residential rates apply depends on whether the subject matter of the transaction consists entirely of residential property.
For SDLT purposes, 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 property is not suitable for use as a dwelling at the effective date of the transaction, that can affect whether the purchase is taxed as residential property.
Where there are linked transactions, the SDLT rules require the transactions to be considered together for rate-setting purposes. That is important where two dwellings are acquired as part of the same arrangement.
MDR was historically available in some purchases involving more than one dwelling, but the relief was abolished for most transactions with an effective date on or after 1 June 2024. So any MDR analysis depends on the completion date and any transitional rules that may apply.
On the “unsuitable for use as a dwelling” test, the courts have made clear that the threshold is not low. In uninhabitable or not suitable for use cases, the condition thresholds are now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. The question is not whether the property was unattractive, outdated, neglected, or in need of repair. The question is whether, at the effective date, it was truly unsuitable for use as a dwelling in a real and substantial sense.
Analysis
The starting point is to identify the effective date of the purchase and whether the two acquisitions were linked transactions. If they were bought together under linked titles, SDLT must be analysed across the combined arrangement.
The next step is to determine what SDLT treatment was originally applied:
- standard residential rates;
- higher residential rates for additional dwellings; or
- some other treatment.
If the buyer already paid standard residential rates, the scope for a refund may be limited unless MDR was available at the time. If MDR is not available, there may be no meaningful reduction unless the original return was otherwise wrong.
If the buyer paid higher residential rates, there may be more at stake financially if the transaction should instead have been treated at non-residential or mixed-use rates. But that only works if the facts support the conclusion that at least one of the properties was not suitable for use as a dwelling at completion.
That is where the evidence becomes critical. In this scenario, the structural report contains mixed indicators:
- it records physical defects and signs of deterioration;
- it refers to a lack of bathroom and running water in one unit, according to the buyer’s account;
- but it also says there was no evidence of settlement or subsidence;
- and much of the movement described appears historic, minor, or capable of repair.
Those facts do not automatically establish unsuitability for use as a dwelling. A property can be in poor condition, require substantial renovation, or even be unpleasant to occupy, and still remain suitable for use as a dwelling for SDLT purposes.
After Mudan, the condition threshold is relatively high. The court’s approach means that buyers need strong contemporaneous evidence showing that, at completion, the building lacked the basic characteristics needed for residential occupation, or had defects so serious that it could not realistically function as a dwelling. Evidence may include:
- survey reports prepared close to completion;
- photographs showing the actual state of the property on the effective date;
- evidence of disconnected or absent essential services;
- evidence that key sanitary or kitchen facilities were absent or unusable;
- evidence of serious structural danger or legal prohibition on occupation.
A missing bathroom and lack of running water are important facts, but HMRC and the courts will still look at the whole picture. For example, they may ask whether the issue was temporary, whether the unit could still be occupied with modest works, whether there were other sanitary arrangements, and whether the defects were part of renovation rather than evidence of true unsuitability.
If one dwelling in a linked purchase was genuinely not suitable for use as a dwelling, there is an argument that the linked acquisition was not entirely residential property. That can lead to non-residential or mixed-use SDLT treatment. But this is a technical area, and the strength of the argument depends on the precise facts and documentary record.
Outcome
The practical conclusion is that a refund may be possible, but only if the evidence shows more than disrepair or neglect.
If the purchase completed before 1 June 2024, MDR may need to be considered first. If it completed on or after that date, MDR will usually not assist.
If one of the linked dwellings truly had no bathroom, no running water, and was in a condition that made it unsuitable for use as a dwelling at the effective date, there may be an argument that the linked transaction should have been taxed at non-residential or mixed-use rates. However, following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold is now relatively high, and many poor-condition properties will still be treated as residential for SDLT.
Practical Steps
If you are assessing a similar case, the sensible next steps are:
- Check the completion date to see whether MDR could ever have applied.
- Obtain the SDLT return and confirm exactly what rates were paid.
- Gather contemporaneous evidence from the date of purchase, including surveys, photographs, correspondence, and utility information.
- Identify whether the allegedly defective dwelling lacked essential facilities such as water, sanitation, safe access, or structural integrity.
- Review whether the defects were merely repair issues or whether they made the property genuinely unsuitable for use as a dwelling.
- Consider the linked transaction rules and whether the whole purchase could potentially fall outside wholly residential treatment.
- Take specialist SDLT advice before making or amending any reclaim, because HMRC scrutinises these cases closely.
Conclusion
Buying two dwellings together does not by itself create an SDLT refund. The key questions are when the purchase completed, what SDLT treatment was originally used, and whether one of the dwellings was truly unsuitable for use as a dwelling at the effective date. In poor-condition cases, the legal test is now demanding, especially after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.
Legal References Used
- Finance Act 2003
- Linked transaction provisions within Finance Act 2003
- Residential property definition within Finance Act 2003
- Multiple Dwellings Relief abolition from 1 June 2024
- 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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