What Is an Uninhabitable Property?

In stamp duty, there is an important difference between a dilapidated house in need of renovation and a truly uninhabitable dwelling, as the case law decisions make clear. In this article, we will examine the criteria for uninhabitable property.

The First-tier Tax Tribunal (“FTT”) decision in Mudan contains a useful summary of the present approach to stamp duty uninhabitable property at para 53: “…I consider that a building which was recently used as a dwelling, has not in the interim been adapted for another use and is capable of being so used again (a building, such as the one in Bewley, the defects in which cannot be put right at all, will not be capable of being so used) will count as a dwelling, even though it is not ready for immediate occupation unless the reason/s why it is not ready for immediate occupation are so fundamental (being radioactive or at high risk of collapsing, for example) that the work required to put these problems right goes beyond anything that might ordinarily be described as repair, renovation or “fixing things” (examples of this sort of work being installing a new boiler or heating system, damp problems or floors needing replacing).”

This decision was appealed but the FTT decision was confirmed as correct – see further below.

What makes a property uninhabitable?

Essentially, on a strict view of the current law the defects must not be capable of being put right at all before the building can be classed as uninhabitable. In PN Bewley Ltd v HMRC [2019] UKFTT 0065 (TC) a derelict bungalow building acquired for demolition and replacement with a new dwelling was held to be non-residential property and chargeable at the lower rates in Table B but in Fish Homes Ltd v HMRC [2020] UKFTT 180 (TC) a flat with defective cladding (similar to that used on Grenfell Tower that exacerbated a disastrous fire) was still considered to be a dwelling.

What are the key criteria for an uninhabitable property?

The key criteria are serious structural issues that have left the building or parts of it at risk of collapsing or the presence of dangerous asbestos. In Davis & Guilbert v HMRC TC/2022/11605V the FTT found that the property was not used or suitable for use as a dwelling because of structural issues and the presence of asbestos which rendered the property potentially dangerous so that the non-residential rates of SDLT applied. This is a particularly robust decision because it appeared from the evidence that there had been people occupying the property in the weeks before completion.

What does not count as an uninhabitable property for SDLT purposes?

As the FTT judge said in Mudan, anything that might ordinarily be described as repair, renovation or “fixing things” (examples of this sort of work being installing a new boiler or heating system, damp problems or floors needing replacing) will not make the building uninhabitable. The occupation of the building in the recent past can be a good indicator that the building is not uninhabitable.

The FTT decision was upheld by the Upper Tribunal at [2024] UKUT 00307 (TCC) which set out a list of points to be considered in assessing whether a building should be regarded as suitable for use as a dwelling in this context at [58]:

‘58. In our opinion, the following points should be considered in determining the impact of works needed to a building on its suitability for use as a dwelling:

(1) In assessing the impact of the works needed to a building in the context of determining suitability for use as a dwelling, a helpful starting point is to establish whether the building has previously been used as a dwelling. That is relevant for two reasons. First, as we said in in Fiander UT, previous use as a single dwelling is relevant in determining whether an alteration needed to a building would be a repair or renovation (because of prior use as a dwelling) or, alternatively, an adaptation or alteration, changing the building’s characteristics by making it usable as a single dwelling for the first time. Second, actual use as a dwelling is a very strong indication that the building has possessed the fundamental characteristics of a dwelling, and has previously been suitable for use as a dwelling. An assessment of the repairs and renovations needed can then be made against that backdrop and by reference to the state of the building during its actual use as a dwelling. Previous use is, of course, fact sensitive, and factors such as the length of time between the previous use as a dwelling and the effective date will be relevant.

The fact of previous use as a dwelling does not mean that a building remains suitable for use as a dwelling regardless of what happens to the building and regardless of the effluxion of time. Equally, to state the obvious, the fact that there has been no previous use as a dwelling does not mean that a building is not suitable for use at the effective date. However, previous use is a highly relevant factor in the evaluation of suitability.

(2) Looking at the building as at the effective date, an assessment must be made of the extent to which it has the fundamental characteristics of a dwelling, including the extent to which it is structurally sound. Is it, for instance, a desirable house which has become dilapidated and requires updating, or is it an empty shell with no main roof? Subject to the points which follow, in principle the former is likely to be suitable for use as a dwelling and the latter is not.

(3) The necessary works should be identified, and their impact on suitability for use should be considered collectively. A distinction must be drawn between works needed to render a building habitable and works to be carried out to make the property “a pleasant place to live”, in the words used by the FTT at FTT[30] (such as painting and decorating). The latter do not affect suitability for use as a dwelling.

(4) An assessment should be made of whether the defects in the building which require works are capable of remedy (in colloquial terms, are fixable). That assessment should take into account whether the works would be so dangerous or hazardous as to prejudice their viability (as in Bewley). If they would, then the building is unlikely to be (or remain) suitable for use as a dwelling. It should also take into account whether the works could be carried out without prejudicing the structural integrity of the building (because, for instance, the walls might collapse). If they could not, the building is unlikely to be suitable for use as a dwelling.

(5) If occupation at the effective date would be unsafe or dangerous to some degree (for instance, because the building requires rewiring), then that would be a relevant factor, but would not of itself render the building unsuitable for use as a dwelling.

(6) The question of whether a repair would be a “minor repair” is not irrelevant, but nor is it particularly informative in assessing suitability. While certain repairs were described as “minor” in Fiander FTT, that classification was not a reason for the decision in Fiander UT. It is too vague and abstract to form a principled basis for the overall determination of the impact of the need for repair on suitability. For the same reason, an approach which seeks to establish whether the necessary works are “fundamental” is acceptable if it is effectively shorthand for the approach we describe above, but as a free- standing test it is not particularly informative.

(7) Applying the principles we have set out, the question for determination is then whether the works of repair and renovation needed to the building have the result that the building does not have the characteristics of a dwelling at the effective date, so it is no longer residential property.

59. We have considered whether it would be appropriate to set out more specific guidance, or to formulate the test by reference to some measure such as fundamentality. We have concluded that this would not be appropriate, and would run the risk of placing an unnecessary gloss on the statutory wording.’

On appeal, the Court of Appeal at [2025] EWCA Civ 799 endorsed the UT’s list of points above and at [69] said that these were “practical, workable, and in my judgment reflect the intention of Parliament”.

Do you pay stamp duty on uninhabitable property?

Yes, but at the lower rates in Table B with a top rate of 5% on the slice of the purchase price above £250,000 and no 5% higher rates for additional dwellings or 2% additional rate for non-UK resident purchasers.

Can you reclaim stamp duty if your property is uninhabitable?

Yes, you can reclaim stamp duty on uninhabitable property. If you paid the full residential rates of stamp duty but your property was truly uninhabitable then a refund claim can be made to HMRC based on the lower rates of stamp duty that should have been paid.

How to do you reclaim stamp duty on an uninhabitable property?

Stamp duty refund claims for uninhabitable dwellings must be made by post to BT Stamp Duty Land Tax, HM Revenue and Customs, BX9 1HD. You can read my guide to making stamp duty refund claims here.

What is the PN Bewley v HMRC case and why is it relevant for uninhabitable property?

The Bewley decision was the first reported FTT decision that highlighted how, if a building was uninhabitable, the normal rates of residential stamp duty and the higher rates for companies buying a dwelling would not apply. Uninhabitable property stamp duty therefore carries a top rate of 5%.

As a barrister in independent practice who is authorised to accept instructions direct from members of the public, I can review your potential stamp duty refund uninhabitable property claim and offer you objective advice based on my extensive experience in representing clients before the tax tribunals in cases concerning SDLT refunds. Contact me here.