Can you claim the non-residential SDLT rate if part of a house has no bathroom or running water?

Introduction

People often ask whether Stamp Duty Land Tax (SDLT) can be reduced where a property is in poor condition. A common example is where part of a building has no bathroom, no running water, leaks, damp, woodworm, or other repair problems. The key issue is whether the property was still suitable for use as a dwelling on the effective date of the transaction.

This matters because residential SDLT rates usually apply if the property is a dwelling, even if it needs significant repair. By contrast, if the property was truly not suitable for use as a dwelling at completion, different SDLT treatment may be available. The legal threshold for proving that point is now relatively high, especially after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

The Question

A buyer purchased a house held under two titles. One part was bought for a lower price and the other for a higher price. The buyer says that one side had no running water and no bathroom. There were also active leaks, temporary roof repairs, reports of damp, woodworm, chimney and flashing defects, and concerns about drainage and external water pipe works. Structural movement was reportedly not found, and further gas and electrical inspections were still pending.

The practical question is whether those facts are enough to argue that part of the property was not suitable for use as a dwelling for SDLT purposes.

Nick’s Explanation

Nick’s explanation, put into general terms, is that repair issues and missing amenities do not automatically mean a property stops being residential for SDLT. The legal test is not whether the building was inconvenient, run-down, or in need of substantial works. The question is whether, at the relevant date, it was actually unsuitable for use as a dwelling.

In anonymised form, the core point is this: a property can still count as a dwelling even where there are leaks, damp, timber problems, chimney defects, and missing or defective facilities, unless the condition is serious enough to cross the legal threshold.

That threshold is now harder to meet. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the courts have confirmed that “unsuitable for use as a dwelling” is a relatively demanding test. Serious disrepair is not enough on its own if the property still retains the character of a dwelling and could still realistically be lived in, even if only after repair or with difficulty.

The Law

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

The key statutory concept is whether the subject matter includes “residential property”. 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.

The main provisions are found in Schedule 4ZA to the Finance Act 2003 and related SDLT charging provisions dealing with residential property. In practice, the dispute in these cases usually centres on whether the building was “suitable for use as a dwelling” at completion.

The courts have considered this phrase in a number of SDLT cases. The modern approach is practical and fact-sensitive. The tribunal or court looks at the physical state of the property on the effective date, not simply the buyer’s future intentions or the cost of works.

Most importantly, in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the Court of Appeal made clear that the condition threshold in “unsuitable for use as a dwelling” cases is relatively high. A property does not fall outside the residential rules merely because it is dilapidated, lacks some facilities, or requires major refurbishment.

Analysis

The facts need to be tested against the legal threshold step by step.

First, the fact that the property was acquired under two titles does not by itself change the SDLT analysis. If the titles together form one residential purchase, SDLT treatment usually follows the substance of what was bought. Separate titles do not automatically create non-residential treatment.

Second, one side having no bathroom or no running water is relevant, but it is not decisive on its own. A missing bathroom may point toward unsuitability, especially if there was also no working kitchen, no safe water supply, no heating, unsafe electrics, or serious sanitation issues. But the courts do not apply a simple checklist. They look at the overall condition of the dwelling.

Third, the reported leaks, damp, woodworm, defective gutters, chimney problems, and roof defects all show disrepair. Even significant disrepair, however, often still falls short of legal unsuitability. Many old or neglected houses remain “suitable for use as a dwelling” in SDLT law even though no ordinary buyer would want to move in immediately.

Fourth, the absence of subsidence tends to weaken an argument that the property was fundamentally uninhabitable. Structural instability can be powerful evidence in the right case, but here the structural survey reportedly did not identify that kind of issue.

Fifth, if gas and electrical condition were still unknown at the effective date, that creates an evidential problem. To show that a property was unsuitable for use as a dwelling, the buyer usually needs clear evidence of the actual condition at completion, not later assumptions. Expert reports should ideally address the state of the property as at that date and explain why occupation as a dwelling was not realistically possible.

Sixth, temporary repairs can cut both ways. They show that there were defects, but they may also suggest that the problems were capable of short-term mitigation rather than making the property wholly unusable as a dwelling.

Finally, after Mudan, the overall threshold is relatively high. A buyer would usually need compelling evidence that the property lacked the basic characteristics of a dwelling in a real and substantial way. Examples might include extreme structural danger, complete absence of essential services combined with serious sanitary failure, or conditions making ordinary residential occupation genuinely impossible rather than merely unattractive or inconvenient.

Outcome

On the facts described, the position appears difficult for a non-residential or “not suitable for use as a dwelling” SDLT argument. Missing bathroom and water supply on one side are helpful facts, but the wider description still sounds more like a property in poor repair than one clearly outside the definition of residential property.

Given the current case law, especially Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the condition threshold is now relatively high. Unless stronger evidence shows that the relevant part of the property truly could not function as a dwelling at the effective date, HMRC would be likely to argue that residential SDLT treatment still applies.

Practical Steps

If you are assessing a similar case, the following steps are sensible:

• Obtain all contemporaneous evidence from the completion date, including survey reports, photographs, contractor reports, and correspondence.
• Check whether there was a functioning water supply, sanitation, kitchen, bathroom, heating, electricity, and safe access at the effective date.
• Ask any surveyor or expert to state clearly whether, in their professional opinion, the property was unsuitable for use as a dwelling on that date, and why.
• Separate ordinary disrepair from conditions that made occupation genuinely impossible or unsafe.
• Consider the property as a whole. If only one part was defective, analyse whether the purchased subject matter still included a usable dwelling overall.
• Review the purchase structure carefully where there are multiple titles, but do not assume that separate titles change the residential character.
• Compare the facts against the high threshold confirmed in Mudan before making or pursuing any SDLT reclaim.

Conclusion

A house does not cease to be residential for SDLT just because it has serious defects or needs major work. Where part of the property has no bathroom or running water, that may support an argument, but it is rarely enough by itself. 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.

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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