Can you reclaim SDLT if a second home was uninhabitable when you bought it?

Introduction

People often ask whether Stamp Duty Land Tax (SDLT) can be reduced or reclaimed where a property was in very poor condition when it was bought. A common example is a second home bought with major defects such as damp, a leaking roof, no heating, missing services or missing safety certification.

The key issue is whether the property was legally “suitable for use as a dwelling” at the effective date of the transaction. If it was not, the purchase may in some cases have been taxed at non-residential rates rather than residential rates. That question has become much harder for taxpayers following recent case law and HMRC’s revised approach.

The Question

A buyer purchased an additional residential property which needed extensive works before anyone could move in. The property had serious damp, a leaking roof, no heating and other defects. The buyer stayed in their previous home while the works were carried out and only moved into the purchased property much later. The local authority also gave a council tax reduction for a period on the basis that the property was uninhabitable.

The question is whether those facts could support an SDLT reclaim on the basis that the property was not suitable for use as a dwelling when it was bought.

Nick’s Explanation

Nick’s main point was that the legal position has changed significantly. In summary, his explanation was that before 2 October 2024, HMRC generally accepted that a property could be treated as unsuitable for use as a dwelling if it was too dangerous to live in and needed more than normal repair or renovation. In those cases, non-residential SDLT rates could sometimes apply.

He then explained that HMRC’s current position is much narrower. In anonymised terms, his view was that HMRC now only accepts unsuitability where the property has defects of a fundamental kind which cannot realistically be repaired, rather than defects which are serious but remediable through works.

He also noted that this area has been affected by the Mudan litigation, and that readers should be aware that the threshold for showing a dwelling was unsuitable is now relatively high.

The Law

SDLT is charged under the Finance Act 2003. Whether a property is taxed at residential or non-residential rates depends on the nature of the subject matter at the effective date of the transaction.

The central question in these cases is whether the building was “suitable for use as a dwelling”. If it was, residential SDLT treatment normally applies. If it was not, the transaction may fall to be treated as non-residential or mixed, depending on the full facts.

The case law on “suitable for use as a dwelling” has developed over time. Earlier tribunal decisions sometimes accepted that severe disrepair, danger or lack of basic facilities could mean a property was not suitable for use as a dwelling. However, the courts have taken a stricter view in more recent authority.

In particular, in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the Court of Appeal confirmed a high threshold. 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.

The effect is that a property will not usually be treated as unsuitable for use as a dwelling merely because it is in poor condition, requires major renovation, lacks comfort, or cannot immediately be occupied without works. The defects generally need to go beyond remediable disrepair.

Analysis

The starting point is the condition of the property on the effective date of purchase, not what happened later. Evidence of later works can help show the original condition, but the legal test is applied at completion.

On the facts described, the defects are serious: damp, a leaking roof, no heating, and missing or incomplete compliance matters. Those points may show that the property was unpleasant, inconvenient or even unsafe to occupy without works. They may also support the view that substantial renovation was needed.

However, that does not automatically mean the property was unsuitable for use as a dwelling for SDLT purposes.

Following Mudan, the courts are likely to ask whether the building still retained the character of a dwelling and whether the problems were capable of repair. If the answer is yes, the property may still count as residential even if no reasonable buyer would have moved in immediately.

A leaking roof, damp, absent heating, and the need for electrical or other compliance work will often be treated as repairable defects. The same is true of the absence of some fittings or appliances. In many cases, those matters show disrepair rather than the absence of a dwelling altogether.

The council tax reduction is relevant background, but it is not decisive for SDLT. Council tax rules use a different statutory framework and a different test. A local authority decision that a property was uninhabitable for council tax purposes does not determine whether it was suitable for use as a dwelling for SDLT purposes.

Likewise, the fact that the buyer continued living elsewhere for a period does not by itself answer the SDLT question. Many buyers delay occupation while carrying out works, but the property may still be a dwelling in law.

So the practical question is whether the defects were merely serious but repairable, or whether there was something more fundamental such that the building could not properly be regarded as a dwelling at all on the completion date. After Mudan, that is a difficult case to establish.

Outcome

On these facts, an SDLT reclaim would now be difficult. The defects described are serious, but they sound like defects that can be repaired rather than fundamental defects that cannot be repaired. That means the property is likely still to be treated as suitable for use as a dwelling for SDLT purposes.

A council tax discount for uninhabitability may help as supporting evidence of poor condition, but it is unlikely on its own to secure an SDLT reclaim.

Practical Steps

If you want to assess whether a reclaim is still arguable, the most useful steps are:

• obtain the completion date and confirm the SDLT treatment originally applied;
• gather contemporaneous evidence of the property’s condition at purchase, including survey reports, photographs, contractor reports, mortgage valuation material and correspondence;
• identify whether the defects were repairable disrepair or something more fundamental affecting the building’s character as a dwelling;
• separate council tax evidence from SDLT analysis, as the tests are different;
• review the purchase in light of Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 and any later guidance or case developments;
• take advice before submitting any reclaim, because weak claims in this area are now much more likely to fail.

Conclusion

A property can be in very poor condition and still count as a dwelling for SDLT. After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold for proving that a property was not suitable for use as a dwelling is high. Where the defects are serious but repairable, a reclaim is unlikely to succeed.

Legal References Used

• Finance Act 2003
• 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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