diff --git a/src/fileio.c b/src/fileio.c
index 7c8f00d..4bd773e 100644
--- a/src/fileio.c
+++ b/src/fileio.c
@@ -1298,9 +1298,17 @@
 		 * At start of file: Check for magic number of encryption.
 		 */
 		if (filesize == 0 && size > 0)
+		{
 		    cryptkey = check_for_cryptkey(cryptkey, ptr, &size,
 						  &filesize, newfile, sfname,
 						  &did_ask_for_key);
+# ifdef CRYPT_NOT_INPLACE
+		    if (curbuf->b_cryptstate != NULL
+				 && !crypt_works_inplace(curbuf->b_cryptstate))
+			// reading undo file requires crypt_decode_inplace()
+			read_undo_file = FALSE;
+# endif
+		}
 		/*
 		 * Decrypt the read bytes.  This is done before checking for
 		 * EOF because the crypt layer may be buffering.