Can You Claim the Non-Residential SDLT Rate Because a Flat Was Uninhabitable?

Introduction

A common SDLT question is whether a buyer can avoid the residential rates of Stamp Duty Land Tax because the property was in very poor condition when purchased. This usually comes up where a flat or house had serious defects, no working facilities, or needed major repairs before anyone could live there.

The key issue is whether the dwelling was suitable for use as a dwelling on the effective date of the transaction. That test is important because, if the property was not suitable for use as a dwelling, it may fall outside the normal residential SDLT rules. However, the legal threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

The Question

A buyer purchased a flat and wanted to know whether SDLT should be charged at non-residential or mixed rates because the property was allegedly uninhabitable at completion. The buyer had photographs showing the condition of the flat and was asking whether that evidence could support a refund or amended SDLT treatment.

Nick’s Explanation

Nick’s explanation was that poor condition on its own is not enough. The legal question is not whether the property needed work, looked unattractive, or would be inconvenient to occupy. The question is whether, at the relevant date, it was actually suitable for use as a dwelling.

In substance, his view was that readers should focus on the statutory test and on current case law rather than assuming that disrepair automatically makes a property non-residential. He also indicated that the condition threshold is now demanding, and that evidence such as photographs must show more than ordinary dilapidation or the need for refurbishment.

Put simply, a property can still count as residential for SDLT even if it requires extensive modernisation, repair, replacement of fittings, or significant expenditure before comfortable occupation.

The Law

SDLT is charged under the Finance Act 2003. Whether property is residential or non-residential matters because different rates apply.

The starting point is section 116 Finance Act 2003. Broadly, “residential property” 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.

That means the question is not limited to actual occupation. A property may be empty and still be residential. Equally, a property may be in poor repair and still be residential if it remains suitable for use as a dwelling.

The courts have considered what “suitable for use as a dwelling” means in a number of cases. The current position must be read in light of Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, which confirms that the threshold for showing that a dwelling is not suitable for use is relatively high.

Following that decision, a buyer usually needs to show defects going well beyond ordinary disrepair, dated condition, missing fixtures, or the fact that renovation was intended. The issue is whether the property had ceased, in a real and substantial sense, to be suitable for residential use at the effective date of the transaction.

Analysis

When applying the rules, it helps to work through the following questions.

First, what was being bought on completion? If the subject matter was a self-contained flat or house that had previously been lived in, that points toward residential treatment unless the condition was so serious that the dwelling could no longer reasonably be used as a home.

Second, what was the actual state of the property on the effective date? Relevant evidence may include photographs, survey reports, contractor reports, valuation material, mortgage evidence, and completion documents. The focus must be on the exact date that SDLT treatment is determined by reference to.

Third, were the defects fundamental? Examples that may help a taxpayer include severe structural failure, conditions making lawful or safe occupation impossible, or a state of dereliction that means the building no longer functions as a dwelling in any meaningful sense. By contrast, the following often do not suffice on their own:

• an old or unusable kitchen
• a defective bathroom
• missing white goods
• plaster damage, damp, or worn finishes
• heating problems
• the need for rewiring, replumbing, or redecoration
• the fact that the buyer intended a full refurbishment

Fourth, was the property still recognisably a dwelling? If it still had the character of a flat or house, and the works required were essentially repair, reinstatement, or improvement, HMRC is likely to argue that it remained residential property.

Fifth, how does Mudan affect the position? It makes clear that the bar is now relatively high in uninhabitable or not suitable for use cases. A taxpayer should not assume that because a property was unpleasant, inconvenient, or temporarily unfit for comfortable occupation, it was therefore non-residential for SDLT. The court’s approach narrows the scope for successful claims based only on poor condition.

In many cases, photographs by themselves are not enough unless they clearly demonstrate a very serious level of disrepair. Even then, photographs should ideally be supported by professional evidence explaining why the property was not suitable for use as a dwelling at the relevant date.

Outcome

The practical takeaway is that a claim for non-residential SDLT treatment based on uninhabitable condition will only succeed in a limited range of cases. The condition threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

If the flat was merely run-down, stripped out, in need of modernisation, or missing some facilities, that will often still be treated as residential property for SDLT purposes. A stronger case usually requires evidence that the dwelling had genuinely ceased to be suitable for residential use at completion.

Practical Steps

If you are assessing a similar SDLT position, the sensible steps are:

• identify the effective date of the transaction
• gather dated photographs showing the condition at that time
• obtain the survey, valuation, and any contractor reports
• check whether the property was mortgageable and, if not, why not
• separate ordinary refurbishment issues from fundamental defects
• compare the facts carefully against section 116 Finance Act 2003 and current case law
• consider whether the evidence shows true unsuitability for use as a dwelling, not just serious disrepair

Where a refund claim or amended return is being considered, the evidence should be organised around the legal test rather than around general statements that the property was “uninhabitable”. That label alone does not decide the SDLT analysis.

Conclusion

A property does not become non-residential for SDLT simply because it was in poor condition when bought. The legal test is whether it was suitable for use as a dwelling on the effective date. After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold for proving unsuitability is relatively high, so only genuinely extreme cases are likely to fall outside the residential SDLT rules.

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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