North Yorkshire Council

 

Executive

 

14 July 2026

 

Housing Joint Venture

 

Report of the Corporate Director Community Development

 

This report contains four confidential appendices at Appendix A, B, C and H.  These appendices contain information of the type defined in paragraph 3 of Part 1 of Schedule 12A Local Government Act 1972 (as amended) as it contains information relating to the financial and business affairs of the Council and it is considered that the public interest in maintaining the exemption outweighs the public interest in disclosing the information

 

1.0       PURPOSE OF REPORT

 

1.1       Executive is asked to agree to enter into a Joint Venture (JV) with Lovell Partnerships Ltd and to agree to the conditional disposal of Sandsend Road, Whitby and Eastfield, Scarborough.

 

 

2.0       SUMMARY

 

2.1       The Council is concluding preferred bidder-stage discussions with Lovell Partnerships Limited to establish a 50/50 Limited Liability Partnership (LLP) housing joint venture to accelerate delivery of good quality, environmentally sustainable homes and to increase affordable housing delivery and social value. The model is based on shared risk and shared reward, with the Council investing land and Lovell matching that land value through development funding, with profits (after repayment of third party and member funding) shared equally.

 

2.2       The commercial structure is intended to protect the Council’s position through a land valuation approach that is compliant with S123 Local Government Act 1972 and Circular 06/2003 (The General Disposal Consent (England) 2003) including agreement of a Minimum Option Price prior to committing each site to the JV, and independent RICS valuations (including restricted/unrestricted values where relevant) prior to committing sites and again at final business case/point of transfer stage.

 

2.3       The commercial terms and financial implications are set out in confidential Appendices A, B and C.  An operational Steering Group (consisting of NYC and Lovell staff) will be set up which will provide feedback and challenge to the Development Manager prior to any JV Board meeting.

 

3.0       BACKGROUND        

 

3.1       On 17 June 2025, the Council approved the principle of creating a Joint Venture limited liability partnership between the Council and Lovell for the purposes of constructing and accelerating the delivery of good quality and environmentally sustainable homes, with a focus on accelerating the provision of affordable housing and generating social value. The Council ratified the previous option appraisal and business case developed by Scarborough Borough Council and agreed to enter into preferred bidder discussions.

 

3.2       The procurement set out to establish a Joint Venture Vehicle for 30 years with a contract value of up to £3.9billion. This means that the Council CAN but is not required to utilise the Joint Venture for more sites than those initial sites identified in this report.

 

3.3       The report to Executive on 17 June 2025 identified 4 sites, however, due to the complex nature of Rievaulx Road, Whitby and Sharphaw Avenue, Skipton, these two sites have not been included in the initial sites but have been identified as potential future pipeline sites.

 

4.0       THE SITES

 

4.1       The Council has negotiated minimum option prices for 2 sites. Sandsend Road, Whitby and Eastfield, Scarborough see Appendix D. The sites are anticipated to deliver:

·                Sandsend Road, Whitby (60 homes, 18 affordable in line with planning policy)

·                Eastfield, Scarborough (548 homes, 196 of which affordable, of which 10% (55) will be planning policy compliant and 141 will be additional affordable, which will provide a total of 35% of the development as affordable housing).

It is proposed for these sites to be sold (conditionally) to the Joint Venture subject to several conditions being met. See Confidential Appendix A.

 

4.2       It is proposed that the Joint Venture is given an exclusivity period for Rievaulx Road, Whitby and Sharphaw Avenue, Skipton to work up viable schemes before committing the sites to the Joint Venture.

 

5.0       COMMERCIAL TERMS

 

5.1       The JV is proposed as a 50/50 LLP arrangement with shared risk and shared reward. Lovell will act as Development Manager for the JV (appointing/managing consultants, commissioning surveys and preparing business plans) and as Principal Contractor. The commercial terms are therefore being drafted to ensure transparency and value-for-money, including open-book reporting, benchmarking and market testing, and the ability to review and adjust the construction exclusivity arrangements over time.

 

5.2       The intended commercial protections include open-book principles, clear fee/margin structures, KPIs and performance reporting, and market testing of subcontractor packages. Independent cost scrutiny (through an independent third-party JV Supervisor/Quantity Surveyor who owes a duty of care to the Council and Lovell as JV Member) is envisaged to support challenge of build costs, preliminaries, programme and risk allowances, particularly where the JV is not procuring the main contractor through a competitive tender at each site.

 

5.3       Performance management will operate at both JV-wide and site-specific levels. This includes agreeing the performance framework at incorporation and embedding performance-linked gateways in the site business plan and land transfer process. The Council’s proposed approach is also to phase site release so that additional sites/phases are only progressed where performance on earlier sites/phases has been demonstrated.

 

5.4       Abortive costs (ie pre-construction professional and design fees such as surveys, design and planning costs) are a key commercial consideration, particularly for sites that do not ultimately proceed. The staged gateway approach is intended to control exposure by requiring member approval before material expenditure, and by ensuring that land transfers remain conditional with long-stop dates. The legal documentation will also be clear on how abortive costs are authorised, recorded and apportioned between the JV members if a site is paused or removed from the JV pipeline.

 

 

 

5.5       The detailed commercial terms are set out in confidential Appendix A to this report, but on a high level include:

·                Disposing the sites as set out in 4.1 subject to a satisfactory red book valuation consistent with S123 Local Government Act 1972 and Circular 06/2003 (The General Disposal Consent (England) 2003)

·                Lovell acting as Development Manager for the Joint Venture and Principal Contractor.

·                The Council entering into a forward purchasing agreements for the affordable homes for both Sandsend Road, Whitby and Eastfield, Scarborough. This is anticipated to deliver 226 homes for the Housing Revenue Account and delivering a major contribution to the delivery target of 500 additional homes.

 

6.0       GOVERNANCE

 

6.1       The Joint Venture will be governed by a JV Board which will be made up by 3 representatives from Lovell Partnerships and three representatives of North Yorkshire Council. It is proposed that the Corporate Director Community Development, the Assistant Director Resource (Environment) and the Assistant Director Legal Operations are appointed to the JV Board. The Joint Venture will appoint a Joint Venture Supervisor who shall have a duty of care to both North Yorkshire Council and Lovell partnership. The JV Supervisor will scrutinise the work of and reports by the Development Manager and professional and commercial advice provided to the JV Board.

 

6.2       To support assurance, site business plans will include clear milestone plans, long-stop dates, a route map for planning and land transfer, and a summary of how land value has been calculated. These are intended to form part of the JV Board pack and the Council’s internal governance packs so that site-level decisions (including any affordability/specification trade-offs) are transparent and auditable.

 

6.3       An officer-level operational steering group is proposed to review draft business plans and appraisals (supported by the JV Supervisor and relevant Council specialists) ahead of JV Board consideration, enabling challenge on development and construction costs, land value, milestones, funding assumptions and delivery risk. The JV Board would then make decisions within agreed delegations, with defined reserved matters requiring referral back to the members.

 

6.4       The draft members agreement contains a delegation policy which broadly aligns with the Council’s constitution in so far as its company governance. However, it is proposed that changes are made to the Council’s constitution to allow for effective governance and reflects the draft delegation policy in the JV Member agreement. These changes are set out in Appendix E.

 

7.0       CONTRIBUTION TO COUNCIL PRIORITIES

 

7.1       The scheme contributes principally to the following Council priority: “Place and Environment: Good quality, affordable and sustainable housing that meets the needs of our communities”.

 

8.0       ALTERNATIVE OPTIONS CONSIDERED

 

8.1       As set out in the report to Executive on 17 June 2025, a full Options Appraisal was previously carried out by Scarborough Borough Council, which considered a range of options for taking land forward.  Not to progress with the Joint Venture has also been considered, however, this would significantly impact our housing delivery and ability to deliver the HRA 500 new homes programme.

 

 

9.0       FINANCIAL IMPLICATIONS

 

9.1       As set out in Appendix C, the Council’s 50% equity investment into the Joint Venture will be in the form of land assets, converted into loans upon disposal of sites to the Joint Venture, based on the Land Value for the final approved business case on a site-by-site basis.  The Council will not be obliged to provide any other form of funding, although there is an option to do so within the funding mechanisms, as there is for Lovell’s, along with the use of 3rd party debt. An indicative financial table has been produced in the confidential Appendix C based on the initial sites to provide an illustration of likely exposure within the Joint Venture.

 

9.2       No specific targets have been set internally regarding return on investment as the primary objectives of the Joint Venture are to support Housing delivery and re-investment of Council returns to increase the level of affordable housing, deliver social value outcomes or improve the quality of development.  As a result, in line with the Treasury Management Strategy and Minimum Revenue Provision (MRP) Policy, equity loans will result in an increase to the Council’s Capital Financing Requirement (CFR) and will not attract an MRP charge.  The CFR will be repaid in full as equity loans are repaid.  That said, appropriate financial performance measures will be embedded as part of the Joint Venture reporting process and oversight.

 

9.3       Housing Revenue Account (HRA) acquisitions of affordable units developed by the Joint Venture will be funded from the existing Housing Delivery Programme capital budget. The land value (Minimum Option Price) has been based on the assumption that the Council (the HRA) will be contractually obliged to purchase the affordable homes for an agreed purchase price. The Council, as a landlord, anticipates obtaining Homes England funding for those affordable homes that are over and above the affordable housing planning policy-compliant figure.

 

9.4       The costs associated with finalising the legal documentation (primarily legal and consultancy) will be met from existing budgets within the Housing Service.

 

9.5       The recommendations include the proposal to use the initial capital and revenue receipts from the JV up to a value of £5m to create a Council budget for the use to support JV work including providing A-loan notes to the JV.

 

10.0     LEGAL IMPLICATIONS

 

10.1     The JV will be governed by the following legal documents:

·           A Member’s Agreement entered into by the JV, the Council and Lovell regulating the governance of JV, the responsibilities and dealings between the Council and Lovell in relation to the conduct of business, management and affairs of the JV and the key finance obligations. The Council and Lovell (the “Members”) will hold equal interests in the JV and will have equal rights in decision-making in relation to the JV (save for in the limited circumstances where a party's interest conflicts with the interests of the JV – for example the termination of Lovell’s construction exclusivity.) The Members Agreement includes an:

o      Overarching Business Plan

o      Procurement Policy

o      Delegation Policy - Decision making in the JV operates at three levels: (1) The Council and Lovell have overall control over decision making as Members in relation to key strategic decisions of the JV; (2) Day to day management and operation of the JV is delegated to a board of representatives appointed by each of the Members (the "Partnership Board"); and (3) Some smaller day to day matters where the actions are below certain thresholds are delegated to the Development Manager.

o      Performance Monitoring

·               A Land Transfer Agreement which establishes the terms upon which the JV may draw down the Council-owned sites (or parts of the sites, called Phases) that the Council has identified for potential development by the JV

·               Forward Purchasing agreements for the Council’s commitment to purchase the affordable homes

·               Loan instruments and financial provisions dealing with the ranking of different creditors applicable in relation to the financing of the JV by the Council and Lovell

·               A Development Management Agreement dealing with the development management services to be provided by Lovell as the Development Manager to assist the JV with the delivery of the scheme. The JV will pay the development management (DM) fee to Lovell. The DM Fee is set as a percentage of the Total Construction Costs, which is the total scheme construction cost including contingency and excluding professional fees

·               The Guarantee from Morgan Sindall PLC as Lovell’s parent company in respect of Lovell’s obligations under both the Members' Agreement and the Development Management Agreement

·               The Construction Documents as the JV will procure the works and services from Lovell and others to deliver the projects which will require the execution of appropriate construction documents at the appropriate time

 

10.2     The legal documents are substantially drafted but will need finalising. It is proposed that the Executive delegate the agreement of the final documents to the Assistant Chief Executive (Legal and Democratic Services) providing that they align with the terms reported to Executive.

 

10.3     Where a decision is reserved for the Council as a Member of the JV, it is   then up to the Council to decide exactly how it makes that decision in accordance with its own constitutional arrangements. The Council’s constitution will need amending to reference the Council’s interest in a Limited Liability Partnership and that the Council will exercise its powers and responsibilities as a member of the JV in accordance with the Shareholder Scheme of Delegation. The proposed amendments to the Council’s constitutions are attached as Appendix E.

 

11.0     EQUALITIES IMPLICATIONS

 

11.1     An Equalities Impact Assessment screening form has been attached as Appendix F to this report. The screening assessment has indicated that there are no adverse impacts, so no full assessment is required.  

 

12.0     CLIMATE CHANGE IMPLICATIONS

 

12.1     An initial Climate Change Impact Assessment has been undertaken and    has assessed that there are no adverse impacts, and a full Climate Change Impact Assessment is not required.  See Appendix G.

 

13.0     RISK MANAGEMENT IMPLICATIONS

 

13.1     The risk management implications are set out in Confidential Appendix H. Overall the governance structures put in place will provide robust scrutiny to manage financial, commercial and legal risks.                                                                        

 

 

 

 

 

14.0     REASONS FOR RECOMMENDATIONS

 

14.1     The recommendations will allow the Council to set up a Limited Liability Partnership with Lovell Partnerships increasing overall housing delivery capacity and support the delivery of the Council’s 500 new homes programme into the HRA.

 

15.0

RECOMMENDATIONS

 

The Executive is asked to:-

 

 

i)          Delegate approval of the overarching business plan for the JV to the Shareholder Committee;

ii)         Agree to enter into a Joint Venture with Lovell Partnerships and enter into a Limited Liability Partnership based on the terms set out in this report;

iii)        Delegate the finalisation of the legal documents as set out in Paragraph 10.1- 10.3 to the Assistant Chief Executive Legal and Democratic Services;

iv)        Agree to the conditional disposal of Sandsend Road, Whitby and Eastfield, Scarborough;

v)         Delegate the agreement of the final sales price to the Corporate Director Resources (S151) in line with Appendix B paragraph 3 and 4;

vi)        Delegate the naming and branding of the JV to the Corporate Director Community Development in consultation with the Executive Member for Culture, Arts and Housing;

vii)       Appoint the Corporate Director Community Development, Assistant Director Resource (Environment) and Assistant Director Legal Operation as JV representatives to the JV Board;

viii)      Agree that the initial capital and revenue receipts from the JV up to a value of £5m are used to create a Council budget to support JV work including providing A-loan notes to the JV;

ix)        Delegate approval of loans or expenditure funded by the £5m allocation set out in viii) to the Corporate Director Community Development in consultation with Corporate Director Resources (S151);

x)         Agree to enter forward purchase agreements to purchase homes for the HRA from the Joint Venture as set out in paragraph 6.2 in Appendix A and in line with the existing Housing Delivery Programme budget;

xi)        Recommend to full Council the amendments to the Council’s constitution as set out in Appendix E.

 

 

            APPENDICES:

 

            Appendix A (Confidential) – Commercial Terms

            Appendix B (Confidential) – Land Values     

            Appendix C (Confidential) – Financial implications

            Appendix D – Site Plans

Appendix E – Revision of Council’s Constitution

Appendix F - Equalities Impact Screening Assessment

Appendix G – Climate Change Screening Assessment

Appendix H (Confidential) – Risk Register

 

BACKGROUND DOCUMENTS:

 

Report to Executive 17 June 2025

 

 

 

Nic Harne

Corporate Director – Community Development

County Hall

Northallerton

23 June 2026

 

Report Author – Hannah Heinemann – Head of Housing Delivery and Partnerships

Presenter of Report – Hannah Heinemann – Head of Housing Delivery and Partnerships

 

Note: Members are invited to contact the author in advance of the meeting with any detailed queries or questions.