Development Arrangements relating to the Ground Lease at Harrogate District Hospital

Description

Harrogate and District NHS Foundation Trust ("HDFT") has entered into a Ground Lease dated 23 April 2026 with Noviniti Dev Co 15 Ltd ("Noviniti") ("Ground Lease") in respect of land at Harrogate District Hospital, Lancaster Park Road, Harrogate ("the Hospital") which has been identified by Noviniti as the site of a proposed building extension to the existing entrance to the Hospital. The development will accommodate retail, café and associated seating, office and storage plus circulation space ("the Potential Development"). The agreement leading to the grant of the Ground Lease was the subject of (inter alia) a Transparency Notice published on 21 November 2025 reference C402843, a Contract Award Notice published on 1 December 2025 reference C402843 and a Contract Details Notice published on 29 January 2026 reference C402843. The Ground Lease is for a term of 45 years, subject to earlier break rights in favour of HDFT at the expiry of two years from the date of grant of the Ground Lease (exercisable in the event that the works to undertake the Potential Development have not been commenced by that date) and again as an unconditional right on the date 40 years from the date of completion of the Potential Development. HDFT now intends to enter into further documentation relating to the Potential Development being:- (a) a Licence for Alterations under the Ground Lease authorising Noviniti to undertake the Potential Development; (b) a Deed of Variation of the Ground Lease varying the terms of the HDFT break rights; and (c) a multi party Agreement for Lease ("S2AFL") with Noviniti, Compass Contract Services (UK) Limited ("the Operator") and Compass Group UK & Ireland Limited ("the Guarantor"). Under the S2AFL, Noviniti is not obliged to carry out the Potential Development but if it does not HDFT may exercise its break rights to terminate the Ground Lease if Noviniti does not commence the relevant works by an agreed deadline. Under the terms of the S2AFL, if Noviniti completes the construction of the Potential Development, the Operator is obliged to accept a Lease of the area of the completed building extension for use for retail purposes ("the Operator Lease"). The Operator Lease will be for a term of 40 years from completion of the Potential Development - subject to a series of break rights in favour of the Operator. The S2AFL also provides for the grant by HDFT to the Operator of an occupational lease of areas within the existing Hospital entrance for retail purposes ("the Trust Retail Lease"). The Trust Retail Lease will be for a term of 40 years co-terminus with the Operator Lease – and will end if the Operator exercises a break right in the Operator Lease. The S2AFL further provides that on completion of the Operator Lease, HDFT and the Operator will enter into a sub-lease of the structure of the building extension demised by the Operator Lease - giving HDFT control of and responsibility for the structure of that building. The S2AFL contains a further agreement between HDFT and Noviniti pursuant to which Noviniti and HDFT agree that HDFT will enter into a lease of the new building extension (the area comprised in the Operator Lease) ("Trust Occupational Lease") in the event that the Operator exercises a break right within the Operator Lease bringing the Operator Lease to an end before its term expiry date of 40 years after completion of the Potential Development. If granted, the Trust Occupational Lease will be for a term commencing on the date of grant and expiring on what would have been the date of expiry of the Operator Lease – the date 40 years after the date of completion of the Potential Development. The S2AFL contains provision for HDFT to accept a direct lease of the new building from Noviniti ("Step-in Lease") if the Operator does not enter into the Operator Lease and also for HDFT to accept an "Overriding Lease" to become a direct tenant of Noviniti if the Operator defaults during the term of the Operator Lease. The S2AFL contains provision for HDFT and the Operator to enter into a Deed of Covenant on completion of the Operator Lease. The Deed of Covenant will contain provisions relating to sharing of certain surplus between HDFT and the Operator of retail income above an agreed threshold and reimbursement of sums due/from the Operator as tenant in scenarios where HDFT is at fault or certain adverse events take place. The Potential Development involves construction of a new building extension within the area demised to Noviniti by the Ground Lease and also works to the existing Hospital entrance outside of the Ground Lease demise to create retail and ancillary space within that area and also minor works to the exterior. The works within the demise of the Ground Lease account for approximately 40% of the total costs of the Potential Development. Under the terms of the S2AFL and the Licence for Alterations, Noviniti is under no obligation to serve notice to elect to carry out the Potential Development. No public works contract arises due to the lack of an enforceable obligation to undertake the Potential Development. Following completion of the Ground Lease, Noviniti has control of part of the site of the Potential Development and has the exclusive right to the land on which various of the works comprised in the Potential Development are to be undertaken and practically no other party can undertake the whole of the Potential Development without Noviniti's consent whilst the Ground Lease exists and remains in place ie until such time as the HDFT break right under the Ground Lease becomes capable of exercise on 23 April 2028. As such, the justification for direct award set out in Schedule 5, paragraph 5(a) of the Procurement Act 2023 ("PA2023") applies. In addition, the arrangements constitute "an exempted contract" for the purposes of the PA2023 being contracts for the acquisition of interests or rights in respect of land or buildings and/or which concern interests or rights over land or buildings, in accordance with Schedule 2, Part 2, paragraph 8 of the PA2023. ## Contract award Title: Development Arrangements relating to the Ground Lease at Harrogate District Hospital