The complete guide to condition assessment for stamp duty reclaims
If you are planning to purchase a property and it is deemed ‘uninhabitable’ you might qualify for a SDLT (Stamp Duty Land Tax) reduction in liability.
Eligible for a stamp duty refund? ↑
If your property was ‘not suitable for use as a single dwelling’ at the time of purchase, you may be due Stamp duty rebate
Based on the court case [2024] UKUT 00307 (TCC) involving Mr. and Mrs. Mudan and the Commissioners for His Majesty’s Revenue and Customs (HMRC), a property would be considered not suitable for use as a single dwelling if it possesses fundamental defects that render it uninhabitable and these defects cannot be remedied through repair or renovation without extensive reconstruction or demolition. The key characteristics of such a property include:
- Structural Unsoundness: The building is not structurally sound, with significant risks of collapse or failure. Examples include severely damaged foundations, collapsing walls, or a missing roof that compromises the building’s integrity.
- Presence of Hazardous Materials: The property contains hazardous materials (e.g., extensive asbestos contamination) that make it unsafe for occupancy and pose significant health risks. If the removal or remediation of these materials is impractical or impossible without demolition, the property is unsuitable.
- Irreparable Damage: The building has suffered damage that is beyond repair, such as severe fire damage, extensive rot, or other deterioration that cannot be fixed through normal repair and renovation efforts.
- Demolition Required: The only feasible option to make the property usable is complete demolition and rebuilding. If the existing structure cannot be salvaged or adapted for safe residential use, it is not suitable as a dwelling.
- Lack of Basic Facilities and Physical Integrity: The property lacks essential features that constitute a dwelling and cannot be restored without major construction work. This includes absence of floors, walls, roofs, plumbing, or electrical systems that are integral to making the building habitable.
- Dangerous to Occupy: The building poses immediate dangers that cannot be mitigated without fundamental alterations. This could be due to severe structural issues, environmental hazards, or other conditions that make occupancy unsafe.
- Not Capable of Being Made Suitable: Even with potential repair or renovation, the property cannot be made suitable for use as a dwelling because the required work goes beyond what is considered repair or renovation and enters the realm of new construction.
Examples from the Court Case:
- In the Bewley case referenced within the decision, a derelict bungalow was deemed unsuitable because it contained extensive asbestos, making renovation impractical and unsafe, necessitating demolition.
- Properties that are mere shells with no structural integrity or those where renovation would not remedy fundamental issues (e.g., severe structural defects or pervasive hazardous contamination) fall into this category.
Key Points from the Court’s Reasoning:
- Repair vs. Reconstruction: The court distinguishes between properties needing repair or renovation (which are still considered suitable) and those requiring reconstruction or demolition (which are not).
- Fundamental Characteristics: A property must have the fundamental characteristics of a dwelling to be considered suitable. If these are absent or compromised beyond repair, the property is unsuitable.
- Capability of Repair: If defects can be remedied through repair and renovation without extensive reconstruction, the property remains suitable for use as a dwelling.
- Previous Use: While previous use as a dwelling is a relevant factor, it is not determinative. A property previously used as a dwelling can become unsuitable if it deteriorates to the point where it cannot be feasibly repaired.
Using our condition assessment tool, you can evaluate your property’s condition and determine eligibility for reclassification as non-residential.
For the vast majority of residential properties with typical condition issues, it will be hard to argue for a reclaim. However, if If you’re buying a property with fairly serious condition hazards, it may be worth speaking with Nick Garner (See below) to see what options you might have.
Important to remember ↑
The process of assessing claims by HM Revenue and Customs (HMRC) involves discretion on their part.
Each case is evaluated on its own merit, and a decision will be made based on the specific circumstances. Government guidelines on habitability are taken into consideration by HMRC, but the ultimate decision on whether to reclassify a property as non-residential is left to their discretion.
Condition issues
Use our calculator to see if your property might be considered uninhabitable for stamp duty purposes.