Development Arrangements relating to the Ground Lease at Harrogate District Hospital

Award outcome

Description

On 23 April 2026, Harrogate and District NHS Foundation Trust ("HDFT") and Noviniti Dev Co 15 Ltd ("Noviniti") completed a ground lease ("Ground Lease") in respect of land at Harrogate District Hospital, Lancaster Park Road, Harrogate ("the Hospital"). The Ground Lease relates to an area of the Hospital identified by HDFT and 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 use plus office and storage and 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. HDFT and Noviniti have now entered into:- (a) a Licence for Alterations to the Ground Lease authorising Noviniti to undertake the Potential Development ("Licence for Alterations"); (b) a Deed of Variation to the Ground Lease varying the terms of HDFT break rights; and (c) a multi-party agreement for lease with Compass Contract Services (UK) Limited ("the Operator") and Compass Group & Ireland Limited ("the Guarantor") ("the S2AFL") providing for the grant by Noviniti to the Operator of a lease of the completed building extension for retail and ancillary uses for a 40 year term (subject to tenant break rights) ("Operator Lease") and the grant by HDFT to the Operator of a lease of part of the existing Hospital entrance for retail and ancillary uses for a 40 year term – co-terminus with the Operator Lease. Under the S2AFL, Noviniti is not obliged to carry out the Potential Development, but if it does not do so, HDFT may exercise its break right to terminate the Ground Lease if Noviniti does not commence the relevant works by an agreed deadline. On completion of the Potential Development Noviniti and the Trust will enter into a further Deed of Variation to vary the terms of the Ground Lease. There is provision for HDFT to accept a direct lease of the retail space from Noviniti in place of the Operator Lease if Compass does not enter into the Operator Lease ("Step-in 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. There is also provision that in the event that the Operator exercises its break rights to terminate the Operator Lease before the expiry of the 40 year term, then HDFT will be obliged to accept the grant of a "Trust Occupational Lease" of the area which was comprised within the Operator Lease for a term commencing on the date of termination of the Operator Lease and expiring on the date which would have been the date of expiry of the Operator Lease 40 year term. The S2AFL also contains provision for the grant by the Operator to HDFT on completion of the Operator Lease of a sub-lease of the structure of the newly completed building extension demised by Noviniti to the Operator within the Operator Lease. That sub-lease will leave HDFT in control of and responsible for the structure of that space. The S2AFL contains provision for HDFT to enter into a Deed of Covenant with the Operator. 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 to/from the Operator as tenant in scenarios where HDFT is at fault or certain adverse events take place. Noviniti is under no obligation to serve notice to elect to carry out the Potential Development. No public work contract rises due to the lack of an enforceable obligation. 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. The contractual arrangements the subject of this Notice were previously the subject of a Contract Award Notice dated 06/08/2026 and prior to that the subject of a Transparency Notice dated 30/07/2026.

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