UT/2023/000063 - [2024] UKUT 00307 (TCC)

We note that the property was in some degree of disrepair at the time of purchase (the heating was not working as the boiler needed replacing; there were damp problems such that some of the flooring needed replacing). We have considered if this meant it was not suitable for use as a dwelling as at completion. We are clear that ‘suitable for use’ does not mean ‘ready for immediate occupation’. It would have been obvious to a reasonable person observing the property on the completion date both that the property had been used for dwelling purposes in the relatively recent past and that the things that needed fixing – the boiler, replacement flooring – were not so fundamental as to render the property unsuitable as a place to live. Hence, in our view, the state of disrepair did not render the property unsuitable for use as a dwelling.

…..I accept that some defects in what could otherwise be a dwelling or suitable for use as such would mean that it is not so. Defects which make it dangerous to live in fall within that category but such danger must in my view be such that a reasonable person would say "it's too dangerous to live there". Some risks to health and safety may fall into this category: high radioactive pollution, the high probability of walls collapsing, and the kind of hazards which would spur a local authority to issue a prohibition notice restricting the use of the premises.

The risk which the cladding on the block created was a risk that if a fire started and if it spread to the cladding it would maim or kill the occupants of the flat. The contingency that the risk would fructify only if there was a fire and only if it spread to the cladding in my view reduced the level of danger, and it seems to me that: the fact that the local authority was not shown to have served a prohibition or enforcement notice, that Miss Fish's friend agreed to live in the flat and that Mr and Mrs Fish countenanced Miss Fish living there, meant that a reasonable person would not say that it was too dangerous to live there.

As a result I find that the risk imposed by the cladding was not such as to prevent the flat from being a dwelling or being suitable for use as a dwelling.

We agree with the above analysis [in Mudan]. The question of determining suitability for use of a building as a dwelling (or as relevant a single dwelling) is a question of fact in which all the circumstances will need to be considered. As noted in Bewley a dwelling can be expected to have facilities for washing, cooking and sleeping. A property which entirely lacks such facilities is unlikely to suitable for use as a dwelling; such a property would not be ratable as a dwelling and, for instance, for the purposes of the VAT rules concerning a dwelling would not represent a dwelling. However, where a property has such facilities which are unserviceable but can be repaired or replaced, the property will continue to be suitable for use as a dwelling.

A building which has the facilities to be a dwelling, but which is so structurally unsound or has some other feature (such as asbestos) which precludes repair/renovation then the building will cease to be suitable for use as a dwelling. In essence, in such cases, the land acquisition is of a plot suitable for development and not the building on it. These situations will, in our view, be relatively unusual (Bewley was however, one such example). In our view the majority of renovations will involve making a house which is suitable for use as a dwelling a habitable residence meeting modern building regulations and becoming a comfortable home ready for immediate occupation. The statutory intention was to tax such properties at the residential or higher rate of SDLT (the higher rate applying where the purchase is by a company or as a second home).

In the present case…the Property as a whole was structurally sound. A number of joists were unsound but had not fallen. Ceilings had come down and it was not considered that part of the house was safe, but it was a property which had all the required facilities for living. It had fallen into a state of disrepair in one part – which formed less than half of the floor area of the house. The Appellant renovated it into a beautiful house ready for immediate occupation. They did not take a non-residential building and make it into a dwelling.