If you are looking to buy a renovation project or a “fixer-upper,” you might have heard a rumour that if a property is in a terrible state, you can pay less Stamp Duty Land Tax (SDLT).
The idea is that if a house is “uninhabitable,” it shouldn’t be taxed as a home (which has higher rates) but as a “non-residential” building (which has much lower rates).
Written by Surveyn Hoh, Senior Conveyancing Paralegal
While this has been a grey area for some time, a recent court judgment has effectively closed this loophole. Here is what you need to know about the case of Mudan v Revenue and Customs Commissioners [2025] and why it matters for your budget.
Background of case
The case involved a couple, Mr. and Mrs. Mudan, who purchased a property in London (14 Liskeard Gardens). The house was in a very poor condition. It had been vandalized, the plumbing and electrics were shot, and it required significant work before anyone could actually live there.
Because of this, the buyers argued that the property was not “suitable for use as a dwelling.” They claimed it should be taxed at the lower “non-residential” rate, which would have saved them a significant amount of money.
Court Decision
The Court of Appeal disagreed with the buyers and sided with HMRC.
The judge ruled that there is a big difference between a property being “ready to move into” and being “suitable for use as a dwelling.”
The court confirmed that a house is still a house, even if:
- The boiler or heating is broken.
- The electrics need a full rewire.
- The kitchen or bathroom needs replacing.
- It has been vandalized or neglected.
The only time a property might be considered “non-residential” is if it has been effectively destroyed—for example, if the roof is missing or it is little more than a shell of four walls.
What This Means for You
If you are buying a property that needs modernization – even if it needs a lot of work – you must budget for the standard Residential Stamp Duty rates.
The previous owner sold the property as a home, and despite its poor condition, it retained its character as a residential building.
Don’t bank on a tax discount just because the property needs work. Unless you are buying a derelict shell that is structurally ruined, HMRC will expect you to pay the full residential tax rate. If you are unsure about your specific purchase, please ask us before you commit to your budget.
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