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[2006] Disturbing Trend - Resorts Refusing to Take Back Timeshares When Nothing Owing

Kurt Brown

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I recently was sent a letter by a homeowners association that owners would be assessed a large amount in a special assessment.

In response, I entered into discussions with resort personnel.

The timeshare resort is distant from our home and is of no real further use, especially facing such a large special assessment.

Since there was nothing owing on the timeshare other than the current year's maintenance fees, I was preparing a new deed and transfer letters at my cost; that I would record the deed at no cost to the resort (I am an attorney).

The Assistant Manager wrote back that the Association does not take back timeshares.

I sent the following in response:

"I am trying to be helpful and trying to return the timeshare at no cost to the Homeowners Association, as compared to the Association hiring an attorney and going through the foreclosure process. I am an attorney and have drawn up the new documents at my cost, and will spend the considerable amount of money in recording fees to deed it back at no cost to the Association.

If the Association will not take the timeshare back when there is nothing owing other than the coming year's maintenance fees and assessments, the Association is in effect telling me that the timeshare is not even worth a year's maintenance fees. Under those conditions, it would make absolutely no sense to send even more money for an assessment on worthless property.

If that is the case, I would like to make sure that this issue is brought up at the next Homeowners Association meeting, in that the Association is wasting the owners' money unnecessarily in forcing owners to go through the foreclosure procedure. Please let me know when the next such meeting is scheduled.

Please have the head of the Homeowners Association respond to this message by next Monday."

I am awaiting a response.

I can understand resorts in a selling mode, when the sales are done using the typical high pressure, that the resorts would not want to take back deeds when there is a binding sales contract and when there is a considerable amount of money still owing on the purchase. A contract is a contract. And some people simply refuse to honor their commitments.

I would think that under those circumstances, the timeshare industry to build owner trust would take them back under extenuating circumstances, such as serious illness, death, permanent loss of job, etc. when those circumstances did not exist at the time the contract was signed.

In the current case, when there is nothing owing, I cannot understand the position of refusing to take them back with there is nothing owing on the purchase. Of taking the position that the purchaser is responsible forever for paying yearly maintenance fees, no matter what the situation.

I would expect that some resorts would threaten heirs in case of death of the purchaser, of the consequences of not paying.

I don't think that such policies do anything to keep the timeshare industry credible.

Any thoughts?

Kurt Brown
kjbrown@sprintmail.com
 

Kay H

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Welcome back, Kurt. Glad to see you posting again:whoopie: .
 

EZ-ED

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WOW!!! Now that's some logic. Sorry but I would side with the resort on this.

You should be able to come up with a more creative way of disposing of your obligation
 

Dave M

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Good to see you posting, Kurt!

I don't know what the best answer is to the dilemma, but I can understand that for some HOAs, it might not make sense to take a week back, even at no cost. Although there are some resorts that will take timeshares back, others don't.

What follows summarizes the reasoning expressed by one HOA director at one of my resorts.

First, some HOAs, like most businesses, concentrate on what they do best - managing the resort's operations. Getting into the resale business is not in the cards for some HOAs. Even if a developer is involved, the developer might not want the week back if there is still significant unsold inventory.

More importantly, the legal documents for the resort (the CC&Rs) almost certainly allow the HOA to come after an owner for any unpaid fees and collect that amount and collect any attorney, court and other costs of collection. If so, the HOA has an almost guaranteed source of revenue for the fees, unless the owner goes into bankruptcy.

Conversely, if the HOA takes the week back and can't sell it quickly, it might have an albatross on its hands with the necessity to incur some costs to eventually sell it and the HOA will have lost the source of fee income while the week is owned by the HOA.

Thus, the HOA would prefer that the current owner arrange for a new owner so that there is no interruption of fee income (assuming the HOA would enforce collection) and so that the resort doesn't have to get into the timeshare resale business.
 

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The real issue is that there is a real possibility that the week is worthless. That's one of the travesties in timesharing when that happens.

I guess what you could do is set up an LLC, transfer the timeshare to the LLC and the BK the LLC. Then, the resort will be forced to deal with the situation instead of putting their head in the sand about worthless intervals.

Worthless timeshare intervals hurt everyone involved in the resort. The HOAs should try to do something about it.
 

Kurt Brown

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Collecting court costs and attorney fees?

Dave M said:
Good to see you posting, Kurt!

I don't know what the best answer is to the dilemma, but I can understand that for some HOAs, it might not make sense to take a week back, even at no cost. Although there are some resorts that will take timeshares back, others don't.

What follows summarizes the reasoning expressed by one HOA director at one of my resorts.

First, some HOAs, like most businesses, concentrate on what they do best - managing the resort's operations. Getting into the resale business is not in the cards for some HOAs. Even if a developer is involved, the developer might not want the week back if there is still significant unsold inventory.

More importantly, the legal documents for the resort (the CC&Rs) almost certainly allow the HOA to come after an owner for any unpaid fees and collect that amount and collect any attorney, court and other costs of collection. If so, the HOA has an almost guaranteed source of revenue for the fees, unless the owner goes into bankruptcy.

Conversely, if the HOA takes the week back and can't sell it quickly, it might have an albatross on its hands with the necessity to incur some costs to eventually sell it and the HOA will have lost the source of fee income while the week is owned by the HOA.

Thus, the HOA would prefer that the current owner arrange for a new owner so that there is no interruption of fee income (assuming the HOA would enforce collection) and so that the resort doesn't have to get into the timeshare resale business.

Dave,

I have drawn up the papers and e-mailed them to the resort and offered to pay the $85+ recording fees, and specifically told them that I was doing this so that they could AVOID the costs of foreclosure.

I can see a court awarding a judgment for maintenance fees. But, when I have stated in my correspondence that them refusing to take it back with no cost is in essence telling me that the timeshare is not even worth the amount of maintenance fees? Could it not be argued that the ownership is not worth the amount of maintenance fees charged? And, I wonder if resorts employ someone to try to collect from out-of-state owners. Are you aware of resorts going through that process? But, court costs and attorney fees under that scenario?

That homeowners associations have a blank check to charge any amount they want for maintenance fees and special assessments, and to increase them whenever they want? And that owners really can do nothing about that, for all of eternity? That continuing to put more and more money into an obsolete property, when it would make more sense to sell it off and split the proceeds among the owners?

The albatross is around the neck of the individual owner, caused by resort policies (perhaps partly due to inflation). What seemed like a good deal at $200/week/year, may not be a good deal at $800/week/year in an obsolete property. And, there is no cap on maintenance fee increases; special assessments. What are the limits - $3000/week/year?

In most contracts, there is some sort of breach clause where the contract can be bought out. Timeshare agreements are perpetual moneymakers for "someone" with no "out". What if no one will take it off your hands for $1, after trying to sell for years?

I am suggesting that the operators of the resort ARE in the business of operating it, and should have the best opportunity to maximize the equity in "free" inventory. If they have significant unsold inventory, doesn't that relate to an original substandard business model under which their inventory is overvalued? If it makes no economic sense to operate it, why keep it going? If one of us owned a resort outright and it wasn't making money, wouldn't it be best to sell it off and stop the loss. In the case of timeshares, the resort has under the present setup a guaranteed source of fee income no matter what they do, if I follow your argument. And, that source goes on forever.

Can you think of another similar business that is immune from market forces?
 

Dave M

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The reason I think your offer for the resort to avoid the costs of foreclosure is being rejected is that they may well not intend to foreclose, especially if they would plan to be aggressive in collecting any fees that might be owed.

I live in a condo development and am on the BOD. We have a firm policy against foreclosing, except as a last resort. We do, however, have an outside attorney who acts as our collection agent, sending past due letters, threats of liens and lawsuits, filing liens, filing court actions and ensuring that we collect every penny we are owed, including reimbursement of collection costs so that other owners do not incur any expenses that should be borne by the errant owner.

Perhaps that last phrase is key to your situation, as I know it is to the timeshare resort that I referred to earlier. The HOA doesn't want to risk incurring any expense that would be borne by other owners. Offering to take back any week that an owner doesn't want would, in that case, be a sure route to financial ruin for the HOA because there are a high number of off-season weeks that, IMHO, I can't imagine anyone would want to own - certainly not the HOA.

I can't speak to the motivations of your HOA. However, I'm very pleased that the two I have referred to don't take risks that might have a higher tendency to increase net expenses that I and other owners would have to bear proportionately.

Yes, I hear loud and clear that you want to SAVE your HOA money. That works, however, only if the HOA is confident that they can quickly find a new owner for your week, at no cost to the HOA, and also find new owners for the flood of other unwanted timeshares that is sure to follow once word gets out that the resort takes weeks back! My guess is that they don’t have that confidence.
 

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Kurt Brown said:
The Assistant Manager wrote back that the Association does not take back timeshares.

I sent the following in response:

"I am trying to be helpful and trying to return the timeshare at no cost to the Homeowners Association, as compared to the Association hiring an attorney and going through the foreclosure process.

Taking the timeshare back is not at no cost to the HOA. As owner you are currently responsible for payment of the maintenance fees. If they take the unit back they actually lose income.
 

myip

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Taking the timeshare back is not at no cost to the HOA. HOA has to look for a new owner otherwise who will continue to pay the maintenance fees. If allowed, a lot of owners will walk away from their liability.
 

timeos2

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Works both ways

Can you think of another similar business that is immune from market forces?

Kurt -

While the day to day operation of a timeshare is certainly a business often involving an annual budget of millions it isn't a business operation at it's core. The idea is that these developments are real estate similar to a condominium where the public areas and perhaps the buildings are operated by the Homeowners Association with costs shared between all owners while the interiors are the property of the individual owners. Timeshares go farther as the interior areas are split into 51-53 individual owners. They also add the need to furnish and maintain those interiors as well as a check in area that is closer to a hotel than a traditional condo as it isn't reasonable to have each owner bring in their own furnishings, appliances, entertainment eqipment and kitchen utensils for their week of annual use. It is a hybrid of condo and hotel but often sold as real estate would with a deed. Unlike a hotel or an apartment complex with a single private or corporate owner that can decide the fate of the property a condo/timeshare has many owners who hold that control.

It is hard enough to set up a budget and collect each month/year for a condo Association where the owners actually occupy the units most of the time. It is much harder when the scope of the job is much larger and the units each have as many as 52 owners spread out all over the country and beyond. One thing is true for both a full condo and a timeshare - the HOA Board has no right to simply disband or sell the development as they don't own or control it . The individual owners do. It may not be too hard to convince 24 or 48 or 200 owners that reside on site that the buildings are too outdated or the property is worth more in a sale than to keep as a condo and have them vote in whats known as a super majority (usually something like a 70% response with at least 51% in favor) or, in some cases, even a 100% yes vote required to take such action. When you raise the owner count into the thousands and spread them around the world obtaining a super majority is highly unlikely and 100% almost impossible to achieve. Simply shutting down the property isn't a realistic option unless it deteriorates to the point where most aren't paying and finally the remaining few give up as has happened to a few old motel conversions in FL and other areas in the past.

This is a long way to say that the premise of a timeshare is a different animal. Many of the rules of real estate don't apply yet it holds some of the more limiting factors such as the need for foreclosures, deeding, etc.

No resort/Association is required to take back a week from any owner. Your read that it makes more financial sense to do so may be correct but not every Association agrees. There are people elected (or appointed) to homeowner Boards who hold the ultimate reponsibility to decide what is best for the resort they are charged to operate for all the owners. I can see where they wouldn't want it known that they are willing to take back weeks if a large assessment is hanging over them. Even so I understand your opposing view that if all that is owed is future fees they should, as a better and less expensive route than foreclosure, simply accept the time back and "sell" it for the fees due. But no one can force them to do that.

I'll bet if you keep after them cooler heads will prevail and realize your offer is the best they are going to do. But if not sell it for a $1 and let the buyer handle the fees. Hope it works out for you.
 

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While I agree that it would be foolish for an HOA to trumpet to all members that it take deedbacks, it is equally foolish to refuse to take them. I know the cost of HOA foreclosures on the OBX, and compared to some other areas that have been cited, they tend to be on the cheap side. Even so, a foreclosure is a whole lot more expensive than a simple deedback.

Aggressively seeking payment from wholeownership condo owners, who have a substantial property interest for a lien to attach to and also probably live in the area, may be good business. Is it not for a timeshare HOA whose members are probably scattered all over the country and owe relatively small amounts. An attorney collect a $500 debt? The attorney fee will probably be more than that!

From a practical sense, I can look at deedback policies of OBX timeshares, and the ones with lenient policies are the ones in a whole lot better shape on minimizing non-producing weeks than those with a tough policy. The HOA with the toughest policies also happens to be the one with the worst backlog of non-producing weeks, and has so many weeks awaiting foreclosure that they cannot afford to do but a few of them at a time. This HOA employs a collection agency to give members the third degree if they don't pay, but that doen't really help.

If a resort readily takes a deedback, then they can turn it and get a new owner paying fees more quickly. If someone isn't paying and the resort doesn't either take a deedback or foreclose, they lose multiple years of maintenance fees, which is costly to the HOA.

On the OBX, most resorts do take deedbacks.

I had an elderly lady call me one time from the resort with the tough policy.
She and her late husband had bought an early September week from the developer years before and had enjoyed going to the resort for years, being solid fee-paying members. Then he died and she moved several states away. For a while, her son who lived in the area used the week and paid the fees, but then, he too got transfered far away and was not interested in exchanging. The next January, when the bill for the m/f came, she called the management company and said she wanted to deed back. There was still plenty of time to resell the week and have the new owner pay that year's m/f.
The management company refused to take a deedback unless she paid that year's m/f, a deedback fee, and a disproportionate legal fee to the management company's attorney to prepare the deed. When she objected that the total would be more than her social security check, the management company took a nasty tone and said they would ruin her credit if she didn't pay. She replied that at well over 80, she really didn't care about her credit anymore and hung up. I found her someone who was happy to pay the cost of a deed plus the maintenance fee and a late fee to get the week. Both parties were tickled pink. This management company was not well serving its HOA. Those weeks were selling at the time around $2,000. It would have been more profitable to the HOA to take the week back, resell it, and get both the resale price, and the m/f.
 

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Have you tried calling the HOA president instead of dealing with an assistant manager?
 

Robert D

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I think, bad as it sounds, a lot of TS's are worthless and should be put out of their misery instead of throwing more money into the project. However, it seems that the HOA should recognize that and decide to liquidate the project. If you look on Ebay, there are a large number of TS's, including some pretty good brands, that can be bought for not much more than one year's maintenance and a ton of no names that can be bought for closing costs. From what I can tell having followed TS's for only 6 months, virtually all TS's (and all of the name brand ones) are set up to benefit the managers (i.e. the Marriott's of the world) and not the TS owners. This sure doesn't seem right but the owners would need to come together to put a stop to it. Also, it seems to me that in TS's that are highly seasonal, the M&T should be significantly higher (probably double) for the high season weeks versus the off weeks. Most off weeks in seasonal resorts are worth very little.
 

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Right on

Robert D said:
Also, it seems to me that in TS's that are highly seasonal, the M&T should be significantly higher (probably double) for the high season weeks versus the off weeks. Most off weeks in seasonal resorts are worth very little.

Robert - You learn quickly! Truer words are seldom typed around the various timeshare boards. Seasonal resorts need to be extremely proactive in creating value for the 6-9 months a year that don't naturally have any. Some are good at it, others aren't. Many used to depend on RCI/II to create that value by allowing lopsided trades into the less seasonal areas but those days are long gone. Now we'll see which resorts can get it right and which ones slowly fade away in the brave new world of the Internet and its ability to remove the mystery from true values and easy rentals.
 

Carolinian

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Most resort areas that claim not to be seasonal, in fact are. Look at the availibility tables in the European version of the RCI directory for Florida, for example. They don't put that table in the US version. Florida has more of an offseason than South Africa according to RCI's tables.

Value is based supply and demand and any factor that skews those dynamics, like a resort being in an overbuilt area, impacts value.

Location is the key to demand, with brand being a comparatively minor factor.

For resorts organized under many state laws that predated the Uniform Condominium Act, it takes 100% agreement to liquidate a resort except when the resort has been mostly destroyed. The Uniform act reduces that majority some, but not much.


Robert D said:
I think, bad as it sounds, a lot of TS's are worthless and should be put out of their misery instead of throwing more money into the project. However, it seems that the HOA should recognize that and decide to liquidate the project. If you look on Ebay, there are a large number of TS's, including some pretty good brands, that can be bought for not much more than one year's maintenance and a ton of no names that can be bought for closing costs. From what I can tell having followed TS's for only 6 months, virtually all TS's (and all of the name brand ones) are set up to benefit the managers (i.e. the Marriott's of the world) and not the TS owners. This sure doesn't seem right but the owners would need to come together to put a stop to it. Also, it seems to me that in TS's that are highly seasonal, the M&T should be significantly higher (probably double) for the high season weeks versus the off weeks. Most off weeks in seasonal resorts are worth very little.
 

Carolinian

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I beleive that your experience with ''seasonal'' resorts is from the far northern part of the country. In the southeast, 6 or 9 WEEKS would be more accurate!

A ''true'' value is not one created by depressing the market for both sales and rentals by a major exchange company dumping exchange inventory onto the rental market, overloading it. Too much supply always depresses value, sort of like in overbuilt areas.


timeos2 said:
Robert - You learn quickly! Truer words are seldom typed around the various timeshare boards. Seasonal resorts need to be extremely proactive in creating value for the 6-9 months a year that don't naturally have any. Some are good at it, others aren't. Many used to depend on RCI/II to create that value by allowing lopsided trades into the less seasonal areas but those days are long gone. Now we'll see which resorts can get it right and which ones slowly fade away in the brave new world of the Internet and its ability to remove the mystery from true values and easy rentals.
 

Carolinian

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Kurt - I sent you a PM with a creative way to handle the situation.
 

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Keep in mind that a lot of the HOA's, especially at many smaller resorts, are poorly equipped to get these units back into the maintenance fee paying category of units in the hands of owners. Thus the fees and occasional lack of logic.
 

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Robert D said:
IAlso, it seems to me that in TS's that are highly seasonal, the M&T should be significantly higher (probably double) for the high season weeks versus the off weeks. Most off weeks in seasonal resorts are worth very little.

This indirectly addresses remarks I have made in other threads regarding the ethics of the timeshare development business. I personally own fixed, floating and points-based timeshares. During the sales pitch, the flexibility of floating and points weeks is an appealing benefit cited. In practice, the concepts were clearly developed to address the sales and marketing problems you describe above- the problem of trying to sell undesireable weeks in seasonal areas.
By going to float or points, developers have neatly sidestepped that problem. They can now sell floats or points by creating the illusion for the buyer that they can reserve any week of the year with their ownership. The reality is that the desireable weeks are usually snapped up quickly by savvy owners, leaving the uninformed or slow with the same low value weeks they could have bought for nothing under the old fixed week scheme- assuming anyone wanted them.
Another interesting variation I saw was in a floating week resort. The deed of the Florida timeshare I bought said 1-52 float. When I went to reserve, I found out to my disgust that nearly all of the peak winter and spring weeks were owned as fixed weeks, with the rest of the weeks distributed as leftovers to us "1-52" chumps. I dumped that one in a hurry, and it was a nice resort on the Gulf, too.
They're selling the same chicken 52 times, and promising everybody drumsticks. It's sad to see such con artists trading on the stock exchange alongside honest businesses.
 
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timeos2

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Weeks - float or fixed - can lead to unfair fees

trice01 said:
By going to float or points, developers have neatly sidestepped that problem. They can now sell floats or points by creating the illusion for the buyer that they can reserve any week of the year with their ownership. The reality is that the desireable weeks are usually snapped up quickly by savvy owners, leaving the uninformed or slow with the same low value weeks they could have bought for nothing under the old fixed week scheme- assuming anyone wanted them. They're selling the same chicken 52 times, and promising everybody drumsticks. It's sad to see such con artists trading on the stock exchange alongside honest businesses.

That can happen if sold simply to maximize profit (an all too common way to sell I'm afraid). Done correctly a points system will take into account the lesser value of the low seasons by assigning less points. Thus to get the higher seasons you have to combine or rent points. But at the same time the annual fees are based on points values, not the per week model, so you actually can get what you pay for. The prime weeks owners hate to hear that as they are used to getting the cream value while being subsidized by the low value cottage cheese times as all pay the same. Where it is done a good points system places the costs where the value is and everyone can get a fair value out. Plus the valuable times are usually averaged out over a longer period - even the best weeks are valued at lower rates while shoulder times may be valued higher than they would be under a strictly weeks linked formula. This is also a leveling factor as it means no one gets the top value but many get the averaged value. When used carefully those values can return more than a single week of use and open up the prime times to more owners. Overall more people are satisfied as they can get what they want, when they want it , in the size they need and at a good value for the annual fees paid. Thats why points are so popular as an exchange / valuation method for timeshare ownership.
 

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Good Points

John-
Thanks for reminding me of the upside of points. You're right- honestly explained and administered, points often do give a better correlation to value and porportionate cost than other timeshare systems. Your caveat regarding profit motive is really what I key in on. I have never yet heard an honest or complete explanation of a points ownership purchase by a sales agent. Every one I have heard either grossly oversimplifies it, paints an unrealistic framework and lets the naive buyer incorrectly fill in the details themselves, or provide other misinformation regarding the use power of the purchase either in RCI or within a resort chain. The sellers of the floating weeks simply present best-case scenarios for buyers and represent them as the average owner's experience, which they are clearly not.
 

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I think that the resort's refusal to take back a week does not indicate its value. It is not saying that the week is worthless. Rather, the HOA/Resort is saying that it is not willing to put in the time and resources necessary to resell the week.

Put it on ebay for a dollar, and you get rid of it without getting into an unnecessary p***ing match with the HOA/Resort.
 

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Hoc said:
Put it on ebay for a dollar, and you get rid of it without getting into an unnecessary p***ing match with the HOA/Resort.

The OP said he is "facing such a large special assessment" so that may sink an ebay sale, even for a $1. I'd still try it though.

Phil
 

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Location
eastern Europe
On the OBX, at least, many of the smaller resorts DO, in fact, have proactive programs to resell weeks, especially the resorts that are self-managed and have a hands-on HOA board. Some are quite creative in finding markets for off-season weeks.


johnmfaeth said:
Keep in mind that a lot of the HOA's, especially at many smaller resorts, are poorly equipped to get these units back into the maintenance fee paying category of units in the hands of owners. Thus the fees and occasional lack of logic.
 
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