Can you reclaim SDLT if a home turns out to have serious damp or mould?

Introduction

People sometimes discover after completion that a home has much worse damp, mould or structural condition issues than they expected. A common question is whether this means the property was not fit to live in, and whether Stamp Duty Land Tax (SDLT) can be reclaimed on the basis that the property should have been treated as non-residential.

This issue matters because non-residential SDLT rates can be lower than residential rates. In some cases, that has led buyers to ask HMRC to amend the return and repay part of the tax. But the legal test for when a dwelling is truly unsuitable for use as a dwelling is now much stricter than many people realise.

The Question

A buyer purchased a home and later found extensive mould and damp problems that were far worse than expected. The condition was serious enough that the buyer says they could not live in the property and now faces substantial repair costs. The buyer wants to know whether this could justify reclaiming some of the SDLT already paid.

Nick’s Explanation

Nick’s core point was that an SDLT reclaim may sometimes be argued where a property was so defective at the effective date of the transaction that it was not suitable for use as a dwelling. If that is established, the property may fall outside the normal residential SDLT treatment and be taxed instead under non-residential rules.

He also explained why this can matter financially: where a purchase was charged at residential rates, including the higher rates for additional dwellings where applicable, reclassification can reduce the SDLT liability.

However, his explanation also highlighted an important change in the legal landscape. The threshold for saying that a property is “uninhabitable” is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. In practical terms, ordinary disrepair, the need for renovation, and even significant defects or hazards will often not be enough. The property generally needs to be in a far more extreme condition before it will cease to count as a dwelling for SDLT purposes.

The Law

SDLT is charged under the Finance Act 2003. Whether residential or non-residential rates apply depends in part on whether the subject matter includes a “dwelling”.

The key statutory rule is found in Schedule 4ZA to the Finance Act 2003, which deals with higher rates for additional dwellings and also contains the definition of “dwelling” used more generally in this context. A building counts as a dwelling if:

• it is used or suitable for use as a single dwelling, or
• it is in the process of being constructed or adapted for such use.

That means the central question is usually whether, at the effective date of the transaction, the property was suitable for use as a dwelling.

For some years, buyers argued that badly damaged or unsafe homes were not suitable for use as dwellings and therefore should not be taxed as residential property. The courts have since tightened that approach. The leading recent authority is Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, which confirms that the test is demanding. The fact that a property is unpleasant, defective, unhealthy, or in need of major works does not automatically mean it is unsuitable for use as a dwelling for SDLT purposes.

Analysis

The analysis usually proceeds in four steps.

1. Identify the condition of the property at the effective date

   The relevant time is normally completion. The question is not what was discovered later in general, but what the true condition of the property was at that date.

2. Ask whether the property was still suitable for use as a dwelling

   This is not the same as asking whether the property was ideal, safe by every standard, mortgageable, or free from serious defects. A property can still be a dwelling even if it has damp, mould, leaks, outdated services, infestation, or requires substantial repair.

3. Apply the high threshold confirmed by the Court of Appeal

   Following Mudan, the condition threshold is relatively high. The property generally needs to be in such an extreme state that it has gone beyond ordinary repair or renovation and is no longer truly suitable for residential use as a dwelling at all. Cases based only on disrepair, health hazards, or the need to carry out works now face a much harder argument than before.

4. Consider whether the SDLT treatment would actually change

   If the property was not a dwelling at the effective date, the transaction may fall to be taxed at non-residential rates rather than residential rates. Whether that produces a refund depends on the purchase price and the rates originally paid, including whether any higher-rate surcharge applied.

In a damp and mould case, the buyer’s practical difficulty is that being unable or unwilling to live in the property immediately does not by itself prove that the property was not suitable for use as a dwelling for SDLT purposes. Severe mould may create real health concerns, and the buyer may quite reasonably move out, but the SDLT test is narrower and stricter than a general housing fitness or consumer fairness test.

So, where the complaint is that the house had extensive damp and mould and required major remedial works, there may be a possible SDLT argument, but only if the evidence shows a truly extreme condition at completion. After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, many cases of serious disrepair will still not meet that threshold.

Outcome

A buyer in this situation should not assume that a mould or damp problem automatically creates an SDLT refund claim. There may be scope to review the position, especially if the property was in an exceptionally severe state at completion and the SDLT paid was substantial. But the legal test is now demanding, and many homes with serious defects will still be treated as residential dwellings for SDLT.

In short, a reclaim is possible in principle, but only in a relatively narrow class of cases.

Practical Steps

If you want to assess whether there is a realistic SDLT reclaim, gather evidence focused on the property’s actual condition at completion:

• the purchase price and the SDLT originally paid
• the SDLT return, if available
• the survey report
• photographs and videos showing the condition at or very close to completion
• contract papers, replies to enquiries, and any reports about defects
• builder, surveyor, environmental health, or remediation evidence showing the scale of the problem
• evidence of whether key facilities were usable, such as kitchen, bathroom, water, drainage, heating and electrics

The next step is to compare those facts against the suitability test in the case law, not simply against whether the property was uncomfortable or expensive to repair. The stronger cases are those where the building was in an extreme state and not merely in poor condition.

It is also sensible to check time limits for amending or reclaiming SDLT, as these can be important.

Conclusion

Serious damp and mould do not automatically mean SDLT can be reclaimed. The question is whether the property was so defective at completion that it was 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 only the most severe cases are likely to succeed.

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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