Situated as York's welcoming hotel that's free! (2,3,5)

I believe the answer is:

on the house

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'that's free' is the definition.
(I've seen this in another clue)

I can't explain the remainder of the clue.

(Other definitions for on the house that I've seen before include "With the management's compliments" , "Free" , "At the publican's expense" , "No charge" , "Where the roofer may be working" .)

I've seen this clue in The Telegraph.

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