Can you reclaim SDLT if a property had unsafe electrics and an unusable bathroom?

Introduction

Many buyers ask whether they can reclaim Stamp Duty Land Tax (SDLT) if the property they bought was in very poor condition. A common argument is that the building was not suitable for use as a dwelling at the effective date of the transaction, so it should have been taxed at non-residential rates instead of residential rates.

This issue often arises where the property had serious defects such as electrical problems, missing facilities or disrepair. But the legal test is now stricter than many people expect. A property is not treated as unsuitable for use as a dwelling just because it needs work, even substantial work.

The Question

A buyer purchased a dwelling and paid SDLT at the higher residential rates. After completion, the buyer considered whether a refund might be available because the property had unsafe electrics and a bathroom that could not be used. The question is whether those defects could mean the property was not suitable for use as a dwelling on the purchase date, so that non-residential SDLT rates should have applied instead.

Nick’s Explanation

Nick’s view was that, if a property truly is not suitable for use as a dwelling at the effective date of the transaction, non-residential SDLT rates may apply, which can produce a refund where residential rates were paid.

However, his conclusion on these facts was that a reclaim would be difficult. In substance, his explanation was that HMRC are unlikely to accept that a property is not suitable for use as a dwelling merely because of defects such as unsafe electrics or an unusable bathroom, unless the defects are fundamental and cannot realistically be remedied in the ordinary way.

He also pointed to the recent change in case law. The threshold in an uninhabitable or not suitable for use case is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. On that basis, his practical view was that making a reclaim on these facts would be unwise.

The Law

SDLT is charged under the Finance Act 2003. The amount payable depends in part on whether the subject matter of the transaction is residential property or non-residential property.

For SDLT purposes, a building is generally 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 key question in many refund cases is whether, at the effective date of the transaction, the building was suitable for use as a dwelling.

If it was not suitable for use as a dwelling, the transaction may fall to be taxed at non-residential rates. In some cases that can significantly reduce the SDLT due.

The case law has developed this test. Earlier decisions led some taxpayers to argue that serious disrepair could take a property outside the residential rules. But the courts have since made clear that the test is not satisfied by ordinary dilapidation, deferred maintenance or the need for renovation works.

The current position must now be read in light of Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. In an uninhabitable or not suitable for use case, the condition thresholds are now relatively high. The focus is on whether the building had fundamental defects such that it could not properly be regarded as suitable for use as a dwelling, rather than whether it was inconvenient, unpleasant or expensive to occupy or repair.

Analysis

The analysis usually proceeds in four steps.

First, identify the condition of the property at the effective date of the transaction, usually completion. The legal test is applied to the property’s state at that date, not after later works have begun and not by reference to what the buyer intended to do with it.

Second, consider whether the defects meant the property lacked the basic character of a dwelling. Problems with electrics, plumbing, heating, damp, kitchen units, bathrooms or decoration may be serious, but they do not automatically mean the building was unsuitable for use as a dwelling.

Third, ask whether the defects were truly fundamental. Following Mudan, the courts have set a high threshold. The fact that a property was not safe to occupy without works, or would not reasonably be occupied in its condition, does not by itself answer the SDLT question. The issue is whether the building had ceased, in substance, to be suitable for use as a dwelling.

Fourth, consider whether the defects were capable of repair in the ordinary course. If the problems could be put right by renovation or replacement works, even if costly, that tends to support HMRC’s view that the property remained residential property for SDLT purposes.

Applying those steps to a property with unsafe electrics and an unusable bathroom, the buyer may feel that the building was effectively uninhabitable. But that does not necessarily meet the legal test. Unsafe electrics can often be remedied by rewiring or repair. An unusable bathroom can often be replaced or reinstated. Unless the wider facts show a more fundamental failure of the building as a dwelling, HMRC are likely to argue that it remained suitable for use as a dwelling for SDLT purposes.

That is why these claims now face a difficult evidential and legal hurdle. The mere fact that the property required major works, or that a lender, insurer, surveyor or buyer considered it unfit for immediate occupation, is not enough on its own.

Outcome

On these facts, a refund claim is unlikely to succeed. Unsafe electrics and an unusable bathroom may show serious disrepair, but after 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. In most cases, defects of this kind will not be enough to move the transaction from residential SDLT treatment to non-residential SDLT treatment.

Practical Steps

If you are assessing a possible SDLT reclaim in a similar case, the sensible steps are:

• Obtain the completion date and SDLT filing position.
• Gather contemporaneous evidence of the property’s condition at completion, including survey reports, photographs, invoices, contractor assessments and lender correspondence.
• Identify whether the alleged defects were repairable, and if so how easily and at what scale.
• Check whether the property still had the essential character of a dwelling despite the defects.
• Review the position against the current case law, especially Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.
• Be cautious about claims based only on disrepair, renovation needs or the fact that the property was not comfortable or safe for immediate occupation.

Where the defects are not clearly fundamental, a reclaim may carry a significant risk of refusal.

Conclusion

A property does not become non-residential for SDLT purposes simply because it had serious defects at purchase. Following Mudan, the legal threshold is high. Unsafe electrics and an unusable bathroom will often indicate a property in poor condition, but not necessarily one that was unsuitable for use as a dwelling in the SDLT sense.

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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