Stamp Duty for Unmortgageable Properties
Did you know that if your second property has been deemed unmortgageable by a mortgage broker, you may be eligible for a stamp duty land tax (SDLT) rebate?
Thanks to new case law, anybody who has paid an additional stamp duty surcharge on a second dwelling that might be considered uninhabitable (for example, declared derelict and therefore not fit for mortgage when surveyed) could be entitled to a hefty refund.
In this guide, our team of specialist legal advisors and chartered surveyors will provide you with everything you need to know about who is eligible and how to make a claim.
The main topics we will cover:
- What is an unmortgageable property?
- What is stamp duty and what’s the current rate?
- Who is exempt from paying stamp duty?
- What is the case law on stamp duty for unmortgageable property?
- How to claim a stamp duty refund
- What Stamp Duty Claims can do for you
- And much more!
Stamp Duty Claims has successfully assisted thousands of clients up and down the country in claiming back money that was overpaid to HMRC.
We offer an unmatched ‘no-win, no-fee’ service that helps clients secure a stamp duty refund on second properties bought at any time over the past four years.
So, if you’re unsure where to begin but think you’ve paid excess stamp duty on an unmortgageable house, we’re here to help.
Let’s dive in…
What is an unmortgageable property?
In short, an unmortgageable property is one that is not likely to be approved by mortgage lenders for a long-term mortgage.
There are a number of reasons that a property can be deemed unmortgageable, but unfortunately these are not always made clear to potential buyers or sellers at the time of purchase.
What makes a house unmortgageable?
If a property is considered to be unmortgageable by a mortgage lender, it is probably because it is uninhabitable for one reason or another. This means it is unfit for human habitation and therefore can’t meet its intended purpose of being used as a residential dwelling or commercial property.
A property may be deemed uninhabitable if it contains:
- Structural or internal disrepair
- Water damage or severe damp
- Invasive plants or pest issues
- Signs of asbestos
- Faults with electrics, heating, or water supply
- Missing finishes, floorboards, or utilities
- Gas or fire safety risks
Basically, if your home is unfit to live in as a result of any of the above, it may be classed as uninhabitable.
Many people in the UK buy derelict properties that turn out to be unmortgageable – yet they still end up paying the higher rate of stamp duty. This can set them back by thousands of pounds, which they may be able to claim back.
Suspect you’ve been overcharged stamp duty for an uninhabitable property? Speak to a consultant and start your rebate today.
What is stamp duty?
Stamp duty land tax (SDLT) is a tax that most people are expected to pay when purchasing residential properties or selling land in England or Northern Ireland.
The amount you’ll be taxed is determined by the price of the property, with different thresholds meaning higher or lower surcharges. Whether you’re a first-time buyer or are on to your second home will also factor into how much you must pay.
Generally, the stamp duty rate is based on where your property falls within HMRC’s Stamp Duty Tax Bands.
Stamp duty land tax reliefs are available to those who meet certain criteria, such as first-time property buyers.
What is the current stamp duty rate?
You may need to pay stamp duty if you purchase a property in England or Northern Ireland for more than £250,000. However, if you’re a first-time buyer, you will be exempt from stamp duty on home purchases up to £425,000 and will pay 5% stamp duty on the portion of the property price from £425,001 to £625,000.
Properties purchased for more than £625,000 are not eligible for relief and must pay stamp duty at the standard rate.
The standard stamp duty rates at present:
- 0% on the first £250,000
- 5% between £250,001 and £925,000
- 10% between £925,001 and £1.5 million
- 12% above £1.5 million
Stamp duty on a buy-to-let property or second home costs an additional 3% on top of the standard stamp duty rates listed above.
Who is exempt from paying stamp duty?
Some people are automatically exempt from the standard stamp duty rate, while others may be able to claim ‘relief’ to reduce their tax burden.
You may qualify for a stamp duty exemption if:
- The property is gained through inheritance
- The property is transferred without any payment between the parties involved
- The property ownership is transferred to a spouse or partner following a separation or divorce
- You are a first-time buyer and the property is purchased for £425,000 or less
- The freehold property is bought for less than £40,000
- You buy a new or assigned lease of 7 years or more (as long as the annual rent is less than £1000 and the premium is less than £40,000)
- You purchase a new or assigned lease that is less than 7 years (as long as the amount you pay is less than the residential or non-residential SDLT thresholds)
If any of these are applicable, you do not have to pay stamp duty or file a return.
What is ‘stamp duty relief’?
‘Stamp duty relief’ refers to when the amount of tax you owe is reduced. First-time home buyers, for instance, are eligible for stamp duty land tax reliefs.
You may also be eligible for relief if you are a:
- Building company buying an individual’s home
- Individual purchasing a right-to-buy property
- Employer buying an employee’s house
- Local authority buying housing as a compulsory purchase
- Property developer providing community facilities and amenities
- Buyer investing in multiple dwellings
- Company transferring property to another company
- Charity buying properties for charitable purposes
- Registered social landlords purchasing property
- Crown employee purchasing property
- Party involved in a property investment fund – such as Property Authorised Investment Funds (PAIFs) and Co-ownership Authorised Contractual Schemes (CoACSs)
Even if no tax is due, you’ll still need to complete a stamp duty return to qualify for these reliefs, just as a formality.
Should I be paying stamp duty if my property is unmortgageable?
Unless you meet any of the above exemption requirements, your stamp duty must initially be paid regardless of whether your property is unmortgageable or not. Failure to pay the required stamp duty could lead to fees and legal problems.
However, if your house was deemed unmortgageable at the time of purchase, the ‘Uninhabitable Properties’ case (discussed below) rules that you may be able to claim a stamp duty rebate. This means you could be entitled to thousands of pounds due in overpaid tax.
A property is usually unmortgageable if deemed ‘uninhabitable’ or ‘unfit for dwelling’ in the eyes of the HMRC. Additional rates of stamp duty do not apply to uninhabitable homes as they cannot be used as residential spaces.
Purchased an unmortgageable home and think you may be eligible for a claim? At Stamp Duty Claims, securing stamp duty rebates is what we do. Speak to a consultant today to see if you have a case.
What is the ‘Uninhabitable Properties’ case law?
We observe the case law presented in PN Bewley Ltd vs The Commissioners for Her Majesty’s Revenue and Customs when determining what is deemed to be ‘uninhabitable’ for unmortgageable properties.
In January 2019, a couple filed a lawsuit disputing stamp duty overpayments on a newly purchased bungalow.
As a result of charges on the second property, they challenged the then-recent April 2016 Stamp Duty surcharge on second properties, where taxation was calculated higher (in this case, 3%) on the purchase of:
- An individual’s additional dwelling
- A company’s purchase of a dwelling
The bungalow was deemed unsuitable for living and the couple won the case, recovering £6,000 from a £200,000 property.
The evidence revealed that the property should never have been considered a ‘dwelling’ at the time of purchase. This is because the property had a number of faults and needed further attention before anyone could actually occupy it.
The couple had ended up overpaying on stamp duty because this second property was not fit for occupation as had initially been assumed.
As a result of this final ruling, we can now use this case as a basis to help other people who were wrongly charged a higher rate of stamp duty for their second homes.
As of 2023, we have successfully claimed back more than £5M in stamp duty rebates from HMRC.
When is a property classed as ‘unfit for habitation’?
In order to determine whether our clients have a solid case, we first need to be confident that their property would be classed as ‘uninhabitable’ by HMRC.
It can be tricky to outline the exact criteria that make a property ‘uninhabitable’ because HMRC considers each application on an individual basis.
As the PN Bewley vs HMRC case demonstrates, gathering strong evidence is one of the most crucial factors in building a valid case and successfully securing a stamp duty rebate.
The following assets can be used to strengthen your application:
- Builders’ quotes
- Improvement notices
- Building surveys
- Photographs
Essentially, the more evidence you can provide that proves the extent of any damage or issues within your dwelling, the more likely you are to win your case!
What sort of damage is HMRC looking for?
Although there are no set guidelines for what damages HMRC is looking for, successful cases will likely have one, or a combination of, the following problems:
- Roof leaks
- Structural defects
- Cavity wall tie issues
- Subsidence or settlement
- Defective lintels
- Cracking
- Damp
- Mould growth
- Insect attack or infestation
- Invasive weeds / invasive plants
- Dry rot
- Flood risk
- Missing bathroom fittings
- Missing kitchen appliances
- Missing or defective plaster
- Missing carpets or finishes
- Missing or damaged floorboards
- Missing / faulty heating
- Missing / unsafe electrics
- Asbestos
- Lack of power or water throughout
- Lead water supply
- H&S or other issues
If your property is experiencing any of these issues, we could help you create a claim.
So, am I entitled to a stamp duty rebate?
If you have been paying the higher rate of stamp duty despite your property being deemed unmortgageable by a surveyor, you should be eligible to claim a rebate.
At Stamp Duty Claims, we help clients claim back on dwellings purchased at any time over the past four years.
Please note that first-time buyers are not usually eligible to make a claim. This is because they will have paid a much lower rate of stamp duty when they first purchased their home due to the aforementioned stamp duty relief.
As such, we find that clients and limited companies who have bought investment properties or second homes are much more likely to benefit from our services.
How can Stamp Duty Claims help me with my unmortgageable property?
We make the rebate process smooth and seamless by offering a first-rate, hassle-free service to our clients on a ‘no-win, no-fee’ basis.
You can rely on our in-house specialists to provide expert guidance and support. We will also manage all of the paperwork and supporting evidence needed to establish a case, so that you don’t have to worry about it.
At Stamp Duty Claims, our experts can assess your eligibility for a rebate free of charge in just 15 minutes! From there, we will take the necessary action to get you your money back.
Book an assessment call directly with us if you think your unmortgageable property was not suitable for residential use but you still had to pay stamp duty at the higher rate. A member of our team will reach out within 24 hours to talk you through the next steps.
Some of the most commonly used issues we’ve built successful claims around, such as structural damage, mould growth, lack of basic amenities, and many more, have been listed above.
Read the full eligibility criteria here.
What happens during a stamp duty claim?
It can take the Stamp Duty Claims team four to six weeks to process your rebate from start to finish.
We know you’ll be eager to see your money back where it belongs as soon as possible if your case is successful, which is why we aim to provide reimbursements within 30 days of the verdict.
We also send all of our requests directly to the technical department at HMRC for further assurance. Once your claim is submitted, we stay in touch with these authorities until it is approved and authorised for your peace of mind.
If a claim is questioned or stopped, we provide further supporting documentation within 30 days to keep things moving forward.
Plus, with our ‘no-win, no-fee’ guarantee, you won’t be charged anything if the case is dismissed.
Why choose Stamp Duty Claims?
At Stamp Duty Claims, we’re dedicated to representing anyone who is eligible for a rebate regarding stamp duty land tax (SDLT) overpayments, ensuring your property portfolio is the most profitable it can be.
Our experts have decades of experience and, over the years, have helped our UK clients secure over £5M in claims! With a 97.5% success rate and a no-win, no-fee guarantee, you could soon be on your way to reclaiming thousands of pounds legally owed to you!
Do you think you may be eligible for a claim?