Can you claim lower SDLT because a property was uninhabitable at purchase?

Introduction

Many buyers search for this issue after being told that a property was in poor condition when they bought it, so they may be entitled to a stamp duty refund or a lower SDLT bill. The question usually arises where the dwelling needed major works, had no working kitchen or bathroom, suffered damage, or could not be occupied immediately.

The difficulty is that the legal test is now quite strict. A property does not become non-residential simply because it is dated, run down, or expensive to repair. Following recent case law, the threshold for saying a dwelling was not suitable for use as a dwelling is relatively high.

The Question

A buyer wants to know whether a residential property that was in very poor condition on completion can be treated as non-residential, or otherwise qualify for lower SDLT, because it was allegedly uninhabitable at the effective date of the transaction.

The same general issue also arises where advisers are considering possible claims involving mixed-use property, non-residential treatment, or historic refund opportunities based on the condition of the building at the time of purchase.

Nick’s Explanation

Nick’s explanation, put in general terms, was that enquiries about “uninhabitable property” are common, but they need careful legal analysis. The key point is that buyers often assume serious disrepair is enough, when in fact the law asks a narrower question: was the building, at the effective date of the transaction, suitable for use as a dwelling?

In anonymised form, Nick’s reasoning can be summarised like this: many properties are bought in a state that requires substantial renovation, but that does not automatically take them out of the residential SDLT rules. The condition must be so serious that the property genuinely fails the statutory test at completion.

That approach is consistent with the modern case law. It also explains why many claims based only on photographs, estate agent descriptions, or renovation costs are weak unless they show that the dwelling could not realistically function as a home at the relevant time.

The Law

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

The starting point is whether the property includes “residential property” for the purposes of section 116 Finance Act 2003. 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;
• land that forms part of the garden or grounds of such a building; and
• interests or rights over land that subsist for the benefit of such a building or land.

If the property is residential, residential SDLT rates apply unless some other specific rule changes the result. If it is not residential, non-residential or mixed-use rates may apply depending on what was acquired.

In disputes about poor condition, the main legal question is usually whether the building was “suitable for use as a dwelling” at the effective date. That wording has been considered in a line of cases, including decisions on derelict or damaged properties.

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.

Analysis

The analysis usually works in five steps.

First, identify the property as it stood on the effective date of the transaction. SDLT looks at the legal and physical position at that date, not what the buyer intended to do later. Planned redevelopment, refurbishment, or demolition does not by itself change the SDLT classification.

Second, ask whether there was a building on the land that was used as a dwelling or suitable for use as one. This is an objective test. The fact that a lender retained funds, an insurer had concerns, or a surveyor recommended works may be relevant evidence, but none of those points is decisive on its own.

Third, distinguish between disrepair and true unsuitability. A property may still be “suitable for use as a dwelling” even if it has serious defects, is old-fashioned, needs rewiring, has damp, has no central heating, or requires substantial expenditure. The courts have repeatedly rejected the idea that poor condition alone is enough.

Fourth, look at whether the defects prevented the property from functioning as a dwelling in any real sense. Stronger cases tend to involve matters such as extreme structural failure, complete absence of basic living facilities together with wider serious defects, or conditions making occupation practically impossible at completion. Even then, the evidence must be tied carefully to the statutory test.

Fifth, consider whether the claim is really about something else. In some transactions, the better question is not “was it uninhabitable?” but whether the purchase was mixed-use because non-residential land or buildings were included, or whether a different relief applied under the legislation in force at the time. Those arguments depend on different legal tests and should not be confused with the uninhabitable-property line of cases.

The significance of Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 is that it reinforces a demanding approach to the “suitable for use” test. In practical terms, the courts are not treating ordinary dereliction, disrepair, or renovation need as enough. The threshold is now relatively high, so many claims that might once have been seen as arguable will be much harder to sustain.

That means evidence matters greatly. Useful material may include:

• the survey or valuation closest to completion;
• photographs showing the actual state of the property on the effective date;
• contract papers and replies to enquiries;
• evidence of utilities, sanitation, and basic facilities;
• builder or engineer evidence directed to habitability at completion, not just later renovation works;
• any contemporaneous lender or insurer documentation.

Even with that evidence, the question remains a legal one: did the condition of the building mean it was not suitable for use as a dwelling at the relevant time?

Outcome

The practical conclusion is that a buyer cannot assume lower SDLT is available just because a property was in very bad condition. The current legal position is restrictive. If there was still a building that was objectively suitable for use as a dwelling, residential SDLT treatment is likely to apply.

Where a claim depends on saying the property was uninhabitable, the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. Many properties needing extensive refurbishment will still count as residential property for SDLT purposes.

Practical Steps

If you are assessing a possible SDLT position or refund claim, it helps to work through the following:

1. Obtain the completion date and SDLT return filed for the purchase.
2. Gather contemporaneous evidence of the property’s condition at that date.
3. Check whether the building had the basic characteristics of a dwelling at completion.
4. Separate “poor condition” arguments from “mixed-use” arguments, because they involve different legal tests.
5. Review the transaction against section 116 Finance Act 2003 and the current case law, especially the higher threshold confirmed in Mudan.
6. If a refund claim is being considered, make sure the evidence addresses suitability for use as a dwelling, not just the cost or scale of later works.

Conclusion

A property is not treated as non-residential for SDLT simply because it was run down or required major renovation. The real question is whether it was suitable for use as a dwelling on the effective date of the transaction. After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, that is a demanding test, and the condition threshold is relatively high.

Legal References Used

• Finance Act 2003, section 116
• 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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