Can you reclaim SDLT if a property was uninhabitable because of rot, damp and roof failure?

Introduction

Buyers sometimes ask whether Stamp Duty Land Tax (SDLT) can be reclaimed where a house was in very poor condition at completion. A common argument is that the property was not suitable for use as a dwelling, so it should not have been treated as residential property for SDLT purposes.

This issue often arises where a survey reveals serious defects such as rotten floors, structural timber decay, major damp, dry rot, roof failure or water penetration into living areas. The difficulty is that the legal test is now demanding. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold for showing that a property was not suitable for use as a dwelling is relatively high.

The Question

A buyer purchased a dwelling and later relied on survey evidence showing major problems. The reported defects included rotten floorboards and joists in the kitchen area, requiring the kitchen to be removed, and roof slates that had deteriorated to the point that water was entering upstairs rooms. The buyer wanted to know whether those defects could support an SDLT reclaim on the basis that the property was uninhabitable at the effective date of the transaction.

Nick’s Explanation

Nick’s response was cautious. He noted that he had reviewed material showing damp issues and dry rot, but said the position would depend on the outcome of the Mudan appeal. In substance, his point was that evidence of serious disrepair does not automatically mean a property falls outside the residential SDLT rules.

Put simply, the key question is not whether the property needed substantial repair, but whether, at the relevant date, it was truly not suitable for use as a dwelling within the meaning of the legislation as interpreted by the courts.

The Law

SDLT is charged under the Finance Act 2003. The residential and non-residential rates depend on the nature of the property acquired. For these purposes, a building counts as 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.

The central statutory provision is Schedule 4ZA to the Finance Act 2003, which uses the concept of a property that is “suitable for use as a dwelling”. That wording has generated a substantial amount of litigation.

The case law shows that the test is applied to the property’s condition at the effective date of the transaction, usually completion. The question is objective. It is not enough that the buyer intended to carry out major works, or that the property was unattractive, unsafe in some respects, or expensive to repair.

The Court of Appeal in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 confirmed that the threshold is relatively high in uninhabitable or unsuitable-for-use cases. Serious defects, even extensive ones, do not necessarily prevent a property from being suitable for use as a dwelling for SDLT purposes.

Analysis

The starting point is to identify the exact defects that existed at completion and the extent to which they affected ordinary residential occupation.

In a case involving rotten joists and floorboards in the kitchen, the first question is whether the damage meant the property as a whole could not realistically be lived in as a dwelling. The complete removal of a kitchen is an important fact, but not always decisive. A property can still be classed as residential even if one room is unusable or major works are needed.

The roof issue also needs careful analysis. If old or porous slates allowed water ingress into bedrooms, that plainly points to serious disrepair. But again, the legal question is whether the level of water penetration and associated damage meant the building was no longer suitable for use as a dwelling at all, rather than simply being in poor condition and requiring repair.

Survey references to damp and dry rot are relevant evidence, but they must be tied to the statutory test. HMRC and the courts will usually look at matters such as:

• whether the property still had the basic character of a dwelling;
• whether it could be occupied, even if only imperfectly or temporarily;
• whether essential facilities were present or capable of use;
• whether the defects affected the whole property or only part of it;
• whether the works were repairs to a dwelling rather than reconstruction of something no longer fit to be a dwelling.

That is where many claims fail. A house may be unpleasant, damaged, damp, leaking or in need of major renovation, but still remain “suitable for use as a dwelling” in the SDLT sense.

After Mudan, anyone arguing that a dwelling was uninhabitable must recognise that the condition threshold is now relatively high. Evidence of rot, water ingress, missing fittings or significant repair costs will not by itself be enough. The evidence must show that, viewed objectively at completion, the property had crossed the line from defective residential property into property that was not suitable for use as a dwelling.

Outcome

The practical answer is that a claim based on rotten kitchen floors, removal of the kitchen, damp, dry rot and a failing roof may be arguable, but it is far from straightforward. On current authority, especially Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the buyer should assume that the bar is high.

If the property still retained the overall character of a dwelling at completion, the fact that it needed substantial remedial works may not be enough to support an SDLT reclaim.

Practical Steps

If you are assessing a possible SDLT reclaim in this kind of case, the sensible next steps are:

• obtain the full survey, not just a summary, and identify the condition of the property at completion;
• gather photographs, contractor reports and any evidence showing the extent of rot, damp, water ingress or missing facilities;
• check whether essential living functions were actually available at completion, including cooking, washing, sleeping and safe access;
• separate evidence of serious disrepair from evidence that the property was truly not suitable for use as a dwelling;
• compare the facts carefully with the reasoning in the leading SDLT suitability cases, especially Mudan;
• consider the filing deadline and whether an amendment or reclaim is still procedurally possible.

Readers should be careful not to rely only on the fact that a property was described as “uninhabitable” in everyday language. For SDLT, that label is not enough unless the evidence satisfies the legal test.

Conclusion

A property with severe rot, damp and roof defects may still be treated as residential for SDLT. The question is whether, at completion, it was objectively not suitable for use as a dwelling. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, that threshold is relatively high, so many poor-condition properties will not qualify for a reclaim.

Legal References Used

• Finance Act 2003
• Finance Act 2003, Schedule 4ZA
• 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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