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  • FIRST POST
    • tryingtobemoresavvy
    • By tryingtobemoresavvy 13th Sep 19, 3:53 PM
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    tryingtobemoresavvy
    Buying out my ex - disagreeing over Declaration of Trust
    • #1
    • 13th Sep 19, 3:53 PM
    Buying out my ex - disagreeing over Declaration of Trust 13th Sep 19 at 3:53 PM
    Hello, I am a first-time poster, but I have been a long-time reader of the advice in these forums. I hope this is the right place to post this to get some help!
    Four years ago I bought a house with my partner for £310,000. I contributed all of the deposit, and we agreed to split other costs and the mortgage. We had a Declaration of Trust drawn up to protect our interests, or so I thought, recording all the costs associated with the sale and promised to improvements and the mortgage, to ensure a fair allocation of shares.
    Here is the breakdown as recorded in the Declaration of Trust (~ indicates small roundings of the figures):
    Me: £47,000 deposit, ~£3500 fees, £10,000 to improvements, half of the £263,000 mortgage.
    Him: ~£3,500, £10,000 to improvements, half of the £263,000 mortgage.
    The Declaration of Trust records our shares as 43.05% to him, 56.95% to me.
    As of this month, we have paid off ~£25,220 of the mortgage, with ~£237,780 remaining. We did split all the improvements, mortgage and bills 50:50 as recorded in the Declaration of Trust.
    We are also going through some party wall issues with the neighbours who are planning works (this is in hand with surveyors but is the worst timing in the world) so I do not believe we can sell until this is resolved (itís also likely to cost us a contribution to strengthen the proposed works). I donít know how long this will be but living together is terrible. He wants me to buy him out immediately, he does not want to wait for a sale, although I plan to sell the house as soon as the party wall works are concluded (I donít want to remain here).
    He claims that he is entitled to 43% of the equity, according to the Declaration of Trust and that is what I need to pay him to buy him out. He agrees the figures are all correct, but that the wording is mistaken and actually benefits him preferentially, which he insists on following. On a valuation of £350,000 (based on a single estate agent he had round and hasn't provided proof for) and 43%, he is claiming £48,000 of the equity (which totals ~£112,000). His brother is a lawyer and has advised this, as well as being the one to respond to emails that I have written him explaining the calculations.
    As I understand it, the equity comprises the increase in value (£40,000), the mortgage repaid (£25,220), and my deposit (£47,000). I cannot understand how he can be entitled to £48,000 when the majority of the equity is my deposit.
    I believed the Declaration of Trust splits the shares as ownership, and so we should calculate our ownership value and deduct the respective share of debt owed on the mortgage, his share thus being ~£31,000. He disagrees, as this would give him less. He did say that might have been the intent, but it was worded wrong and so he wants to follow the wording. He says the Declaration should have said my deposit was taken out first and it doesnít, so I lose out.
    He thinks Iíll get a big windfall when I sell next year, but I pointed out that after all the costs (party wall and his share plus all my contributions to date), I would actually lose money, so he said I should keep the house for ten years and sell then!
    The Declaration of Trust does not state whether these shares apply to ownership or equity. I have gone back to the solicitors who drew up the Declaration, and they have stated the figures are correct, but have not yet responded regarding the wording, nor whether the shares apply to ownership or equity. He said I shouldnít waste money on legal advice (which heís getting for free from his brother), I should just pay him so he can move out tomorrow, and that any court would follow the wording of the Declaration and not care about the stated relative contributions or the intent, so I would lose and have to pay his costs as well. He said I could pursue a claim for the difference against the solicitor who drew up the Declaration.
    While I am waiting to hear back from the solicitors, it is horrible here and I donít know what to do. I can afford to take on the remaining mortgage (I have been speaking to the mortgage broker who arranged our mortgage), but I cannot afford to pay him what he wants as well as whatever may be required for the party wall, and I am upset at the prospect of losing quite a lot of the deposit I put in so he can profit from it. He flatly disagrees with my interpretation and insists on his, so we have reached an impasse. He has said if we donít agree and sort it out, terrible things will happen (but hasnít said what those are). Please, does anyone have any advice?
Page 1
    • dimbo61
    • By dimbo61 13th Sep 19, 4:11 PM
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    dimbo61
    • #2
    • 13th Sep 19, 4:11 PM
    • #2
    • 13th Sep 19, 4:11 PM
    Put the house on the market.
    Take off all the selling costs and split the profit once the mortgage and all other costs have been paid.
    Use the agreement you had drawn up as a guide so give this agreement to the solicitor who is handling the sale.
    Can't see your EX and his brother the solicitor telling another solicitor they want more if he/she has the document in there possession.
    • gettingtheresometime
    • By gettingtheresometime 13th Sep 19, 4:12 PM
    • 4,871 Posts
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    gettingtheresometime
    • #3
    • 13th Sep 19, 4:12 PM
    • #3
    • 13th Sep 19, 4:12 PM
    I'm no expert so with that rider, my thoughts are that it may have been the intention of splitting any equity in the proportion 57/43 after your deposit had been taken out but the wording of the DoT is crucial.

    Do you have anyone you can stay with until this is sorted or at least be with you when you tell him that you will be getting legal advice (if he's made the treat of terrible things happening in writing make sure you have a copy kept away from the property).
    Lloyds OD / Natwest OD / PO CC / Wescott / Argos Card / JD Williams cleared thanks to the 1 debt v 100 day challenge
    • Thrugelmir
    • By Thrugelmir 13th Sep 19, 4:20 PM
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    Thrugelmir
    • #4
    • 13th Sep 19, 4:20 PM
    • #4
    • 13th Sep 19, 4:20 PM
    Did either of you seek independent legal advice after the DOT was drawn up. To ensure that there was no ambiguity or misunderstanding in what had been drafted. Prior to signature.

    He says the Declaration should have said my deposit was taken out first and it doesn’t, so I lose out.
    A major omission from the DOT. If this is correct.

    Who organised the drafting of the DOT?
    Last edited by Thrugelmir; 13-09-2019 at 4:25 PM.
    ďIf the financial system has a defect, it is that it reflects and magnifies what we human beings are like. Money amplifies our tendency to overreact, to swing from exuberance when things are going well to deep depression when they go wrong. Booms and busts are products, at root, of our emotional volatility.Ē
    ― Niall Ferguson
    • j2009
    • By j2009 13th Sep 19, 4:23 PM
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    j2009
    • #5
    • 13th Sep 19, 4:23 PM
    • #5
    • 13th Sep 19, 4:23 PM
    Who drew up your deed of trust?

    If it was done by a professional have you sought their advice?

    Also, perhaps you could post the exact wording of the deed; especially if there are any definitions eg equity may be defined as value net of the deposit in which case you'd be protected.
    • kirtondm
    • By kirtondm 13th Sep 19, 4:26 PM
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    kirtondm
    • #6
    • 13th Sep 19, 4:26 PM
    • #6
    • 13th Sep 19, 4:26 PM
    presumbly you had the greater share of the house as you supplied the deposit so it is already accounted for?

    Therefore as above it is a straight split IF it sells for 350k then he is entitled to 43% of the equity 48K

    The other way of doing it would have been to give you the deposit back then 50% equity each when the deed was drawn up.

    If you take the deposit out of the equity and then split 43% he is being doubly penalised?

    Having said that get another estate agent to value on the basis of selling within 6 weeks with party wall issues ongoing and use that as the valuation?

    a 320K selling prices would give him 35k.
    • j2009
    • By j2009 13th Sep 19, 4:39 PM
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    j2009
    • #7
    • 13th Sep 19, 4:39 PM
    • #7
    • 13th Sep 19, 4:39 PM
    If you take the deposit out of the equity and then split 43% he is being doubly penalised?
    Originally posted by kirtondm

    This isn't strictly true, if the deposit is simply returned with no interest then the OP loses out on the investment opportunity of their 48k. I'm hoping that is what the deed sought to do and maybe there is a critical definition or wording that has been overlooked.
    • xylophone
    • By xylophone 13th Sep 19, 5:26 PM
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    xylophone
    • #8
    • 13th Sep 19, 5:26 PM
    • #8
    • 13th Sep 19, 5:26 PM
    (if he's made the treat of terrible things happening in writing make sure you have a copy kept away from the property).
    That's some treat!
    • tryingtobemoresavvy
    • By tryingtobemoresavvy 13th Sep 19, 5:34 PM
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    tryingtobemoresavvy
    • #9
    • 13th Sep 19, 5:34 PM
    • #9
    • 13th Sep 19, 5:34 PM
    Thanks everyone. The percentages seem to be correct only if it is the ownership that is split then share of mortgage debt deducted. This is because the mortgage debt was included in the original calculations. So, for example if it's split when we have paid off the mortgage and the entire property = equity (so we deliver on the contributions pledged in the DoT), the shares work out effectively as ‘my contributions + share of value increase’ to me, and ‘his contributions + share of value increase’ to him. This scales to any point in time depending on the amount of mortgage that has been repaid and the respective debt deducted, and shares any profit based on our respective level of investment. So the figures are correct as is and don’t allow double counting, but only if the percentage split is for ownership and the mortgage then deducted. There would be double counting if you first took out the deposit and then did the split according to those percentages.
    If it applied to splitting equity, the amount he would be entitled to changes depending on how much of the mortgage he's actually contributed to and thus his share the equity that has been released, so a percentage wouldn't work in that situation. For example, if we sold as soon as we bought the property, all the equity would simply have been represented by my deposit of £47,000, so how could he be entitled to a 43% share of that?
    As I mentioned, I did contact the solicitor and they said that the figures and the percentage split was correct and that we would get the same share at any time (which matches the scenarios I mentioned above under the conditions of ownership split by the percentage). They have not yet responded to my query about the wording not actually showing that. We didn't take independent legal advice separately - we paid for the DoT to be drawn up (included in the fees split), and provided all the figures so they could do that. I thought that would be enough - clearly I should also have paid a second solicitor to check it!
    Also, we can't sell the property because no mortgage lender will lend on a property with a current dispute, which is what a party wall award in progress represents (and it's on record). So this is why we have to wait for that to be resolved before it can be put on the market - and he doesn't want to wait. Even if it's sold, if the wording does indicate that the split only applies after the mortgage is deducted, that is the effectively the same as the current equity split he's proposing, so it seems I would lose out either way.

    I’ve transcribed the relevant bits of the DoT below (identifying info removed) and see that mortgage redemption is mentioned in clause 1 but not clause 2.4:
    The purchase money, being £310,000, paid in consideration of the transfer was provided as to the initial deposit of £47,000 by me, and as to the remaining balance being the sum of £263,000, borrowed by me and him jointly, from the Bank.
    In respect of the renovation costs, both me and him contributed equally to the total sum of £20,000.
    In respect of the fees and costs related to the purchase, both me and him contributed equally to the total sum of ~£7,000.
    Me and him, therefore agreed by signing this Deed that in the event of a sale or transfer or such other disposition of the Property, the net proceeds of sale should be applied or the value attributed in the manner hereafter appearing.
    Now this deed witnesseth as follows:
    1. Me and him shall hold the Property on trust to sell it with power by unanimous agreement to postpone sale and hold the net proceeds of the sale, transfer or such other disposal upon trust (after the deductions of all legal costs, estate agent fees, redemption of mortgage(s), charges and all other incidental costs in respect of the transaction) upon trust from themselves in the following percentages:
    1.1 Him: 43.05%
    1.2 Me 56.95%
    Me and him hereby covenant…
    2.4 On completion of the sale of the Property (other than by way of purchase by one part of the other’s share) the proceeds after deduction of such estate agent commissions, legal fees and disbursements shall belong to me and him in the manner stated in Clause 1 above;
    • j2009
    • By j2009 13th Sep 19, 5:47 PM
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    j2009
    It is difficult to give an response without the full wording; whilst you may think you have included the relevant bits maybe you haven't and therefore you'll get the wrong advice or steer people to your own conclusion. I know this isn't what you want as you want your money but partial info will most likely lead to the wrong answer.

    However, on the limited info the wording refers to net proceeds, this could be net of just the fees or or could be net of your deposit being returned to you.

    How is net defined or is there no definition/context given?

    Oh and I think I'm clutching at straws on your behalf as I think you've signed a bad deed. Sorry for your predicament.
    • tryingtobemoresavvy
    • By tryingtobemoresavvy 13th Sep 19, 6:02 PM
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    tryingtobemoresavvy
    Here is the full text from the DoT (without identifying info). There is no other text in the document.
    Dated X of X 2015
    Trust Deed
    Relating to Address
    Prepared by Solicitors
    This deed of trust is made this X day of X 2015
    Between
    (1) Him
    (2) Me
    Whereas:
    A. By a transfer dated X 2015, me and him purchased Address (“the Property”) and this Property is registered in their names as proprietors at the Land Registry under title no. X.
    B. The purchase money, being £310,000, paid in consideration of the transfer was provided as to the initial deposit of £47,000 by me, and as to the remaining balance being the sum of £263,000, borrowed by me and him jointly, from the Bank by a mortgage dated (blank – there’s no date filled in here). The Property was charged to the lender to secure payment to the lender by way of a mortgage.
    C. In respect of the renovation costs, both me and him contributed equally to the total sum of £20,000.
    D. In respect of the fees and costs related to the purchase, both me and him contributed equally to the total sum of ~£7,000.
    E. Me and him, therefore agreed by signing this Deed that in the event of a sale or transfer or such other disposition of the Property, the net proceeds of sale should be applied or the value attributed in the manner hereafter appearing.
    Now this deed witnesseth as follows:
    1. Me and him shall hold the Property on trust to sell it with power by unanimous agreement to postpone sale and hold the net proceeds of the sale, transfer or such other disposal upon trust (after the deductions of all legal costs, estate agent fees, redemption of mortgage(s), charges and all other incidental costs in respect of the transaction) upon trust from themselves in the following percentages:
    1.1 Him: 43.05%
    1.2 Me 56.95%
    2. Me and him hereby covenant –
    2.1 To observe and perform all covenants restrictions conditions and stipulations at any time affecting the Property and the terms and conditions of the mortgage;
    2.2 To keep the Property and its contents insured against all usual risks to the full reinstatement or replacement value thereof and to pay the insurance premiums thereof and to apply any monies received on any policy of insurance effected on the Property and/or its contents in the replacement or reinstatement of the thing damaged;
    2.3 that neither party shall create nor purport to create any charge mortgage lien or other interest in respect of the Property or any part of it;
    2.4 On completion of the sale of the Property (other than by way of purchase by one part of the other’s share) the proceeds after deduction of such estate agent commissions, legal fees and disbursements shall belong to me and him in the manner stated in Clause 1 above; and
    2.5 Me and him further declare that they will make such applications to the Land Registry and execute and do all such documents acts and things as may be necessary to procure the appropriate registration or entry in the Register of the Title now allocated to the said Property to give effect to the Trusts hereinbefore declared.
    In witness whereof the parties hereto have hereunto set their hands the day and year first before written
    Signed as a Deed by the said Him in the presence of Witness
    Signed as a Deed by the said Me in the presence of Witness
    • j2009
    • By j2009 13th Sep 19, 6:17 PM
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    j2009
    Sorry to say that really does look bad.

    However, in your shoes I would go back to the original solicitor who drew the deed up and complain that it does not appear to protect your interest and ask for their free advice.

    Ideally you would like them to act on your behalf (for free) to ensure that your interests are protected. If they will not then I would raise a complaint with the regulator as it may be that you can show that they have not acted to the necessary standard.

    Your best argument whether you contest directly with you ex or seek compensation through the regulator is that no reasonable person would read that deed and believe, based upon the circumstances of the transaction, that it was the desired outcome. Unfortunately to try for any compensation I suspect you'd need to complete the transaction and realise your loss.

    I'm not sure I can offer any better thoughts but maybe others will.
    • tryingtobemoresavvy
    • By tryingtobemoresavvy 13th Sep 19, 6:35 PM
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    tryingtobemoresavvy
    Thank you j2009, that's still really very helpful (even though it's a rubbish situation!). I had to chase the original solicitors for 2 weeks with emails and phone calls to get them to look at it and then they only looked at the figures so I've been a bit stuck trying to figure it out myself. So at least I now know where the problem is, and how I can approach it. I'll speak to the original solicitors on Monday and do as you suggest. It also makes me really sad that my ex knows that he's getting more than he's entitled to, and what the intention was, but is still insisting on it. I guess you never really know what someone is like until something like this happens.
    Last edited by tryingtobemoresavvy; 13-09-2019 at 6:40 PM.
    • steampowered
    • By steampowered 13th Sep 19, 6:48 PM
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    steampowered
    I think you need to speak to an independent solicitor. Try to find a solicitor who practices in the area of property litigation and see if you can get some initial advice.

    It should not be expensive or difficult for an independent solicitor to advise you on how the agreement should be interpreted, and on whether the drafting is ambiguous or not.

    I wouldn't bother following up with the original solicitors. They are not likely to be particularly helpful. And if they are just conveyancers they may not be property litigators.
    • steampowered
    • By steampowered 13th Sep 19, 6:50 PM
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    steampowered
    Ideally you would like them to act on your behalf (for free) to ensure that your interests are protected. If they will not then I would raise a complaint with the regulator as it may be that you can show that they have not acted to the necessary standard.
    Originally posted by j2009
    Personally I would suggest that the Op's time and energy is better spent on getting independent advice, rather than on having a fight with her former conveyancers. I'm sure the fight with the ex is more than enough.

    If the independent solicitor advisers that the conveyancers were negligent or that the drafting does not do what it is supposed to do, the Op can look at taking up a complaint at a later date.
    • ethank
    • By ethank 13th Sep 19, 7:06 PM
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    ethank
    My reading of that is that he is entitled to that % if you agree to sell to a third party, it does not apply on a transfer of equity between you, otherwise it is silent.

    I think you should push back and tell him to do one.
    • Fire Fox
    • By Fire Fox 13th Sep 19, 7:13 PM
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    Fire Fox
    Hello, I am a first-time poster, but I have been a long-time reader of the advice in these forums. I hope this is the right place to post this to get some help!

    We are also going through some party wall issues with the neighbours who are planning works (this is in hand with surveyors but is the worst timing in the world) so I do not believe we can sell until this is resolved (it’s also likely to cost us a contribution to strengthen the proposed works). I don’t know how long this will be but living together is terrible. He wants me to buy him out immediately, he does not want to wait for a sale, although I plan to sell the house as soon as the party wall works are concluded (I don’t want to remain here).

    His brother is a lawyer and has advised this, as well as being the one to respond to emails that I have written him explaining the calculations.

    He disagrees, as this would give him less. He did say that might have been the intent, but it was worded wrong and so he wants to follow the wording. He says the Declaration should have said my deposit was taken out first and it doesn’t, so I lose out.

    He thinks I’ll get a big windfall when I sell next year, but I pointed out that after all the costs (party wall and his share plus all my contributions to date), I would actually lose money, so he said I should keep the house for ten years and sell then!

    The Declaration of Trust does not state whether these shares apply to ownership or equity. I have gone back to the solicitors who drew up the Declaration, and they have stated the figures are correct, but have not yet responded regarding the wording, nor whether the shares apply to ownership or equity. He said I shouldn’t waste money on legal advice (which he’s getting for free from his brother), I should just pay him so he can move out tomorrow, and that any court would follow the wording of the Declaration and not care about the stated relative contributions or the intent, so I would lose and have to pay his costs as well. He said I could pursue a claim for the difference against the solicitor who drew up the Declaration.

    While I am waiting to hear back from the solicitors, it is horrible here and I don’t know what to do. I can afford to take on the remaining mortgage (I have been speaking to the mortgage broker who arranged our mortgage), but I cannot afford to pay him what he wants as well as whatever may be required for the party wall, and I am upset at the prospect of losing quite a lot of the deposit I put in so he can profit from it. He flatly disagrees with my interpretation and insists on his, so we have reached an impasse. He has said if we don’t agree and sort it out, terrible things will happen (but hasn’t said what those are). Please, does anyone have any advice?
    Originally posted by tryingtobemoresavvy
    Welcome to MSE.

    He can want and insist any amount of hot air. His brother must have told him he cannot actually force anything quickly or easily. So they are trying to bully and harrass you into making poor snap financial decisions. He has nothing else but hot air.

    One of you can move out, the other can take in a lodger to make that work financially until the party wall stuff is resolved. Then sell. In the mean time get independent legal advice.

    For now do not listen, do not respond, do not engage. Or use the 'broken record technique'. Same short phrase over and over and over whatever he says.

    Turn away, walk away, run away, move away so he cannot verbally bully and manipulate you. You are stronger and smarter than he is. And you have MSE on your team.

    (((hugs)))
    Last edited by Fire Fox; 13-09-2019 at 7:17 PM.
    Declutterbug-in-progress.⭐️⭐️⭐️ ⭐️⭐️
    • getmore4less
    • By getmore4less 13th Sep 19, 7:25 PM
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    getmore4less
    Major failure on the DOT.

    We see this a lot on here some including solicitors don't have a clue how to get these right.

    Apart from the financial details being a mess there are no trigger clauses to cause a sale.
    No clauses to determine costs if a party moves out dies or moves a different partner in.

    The financial clauses 1, 1.1, 1.2 is a % of net proceeds.

    Not a good agreement.
    • tryingtobemoresavvy
    • By tryingtobemoresavvy 13th Sep 19, 7:55 PM
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    tryingtobemoresavvy
    Thanks everyone, all this advice and support means a lot. I thought we were doing the right thing at the time by getting a DoT but have now learned that you need to get legal advice on your legal advice! I have got some recommendations for other solicitors who've done this kind of thing for family/friends so I will speak to an independent solicitor and find out what to do next. I will tell him I am not agreeing to anything until I do this, so he just has to wait. I really don't want to move out because we have a lot of animals, none of which he wants, so I need to be sure they are taken care of, plus the house is full of my furniture and possessions (previously bought or inherited from my late granny), there's actually only a few big-ticket items we bought together as part of the equal-split improvements. So there's so much in here that means something to me and I really worry about it leaving it all with him. And he says he refuses to move out until he 'gets what he deserves'. I think he deserves something quite different to £48,000!
    • JMA74
    • By JMA74 13th Sep 19, 8:30 PM
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    JMA74
    He is jointly liable for the debt on the mortgage until he is removed from the mortgage.

    Do you think you will be able to take the mortgage on in your sole name? If the lender doesn't agree then he can whine and complain all he wants, he ain't coming off that mortgage until the property is sold.

    Might give you a bit of breathing room.

    Also, if you buy uim out now as you are unable to sell, who is liable for sales fees when you can sell?

    Unless you are to blame for relationship breakdown and you are trying to make good, there is no point in putting yourself in a worse financial position until you agree ready
    I am a Mortgage Adviser

    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
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