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negotiating snda tenant

A lender looking to take a security interest in landlord’s real property as collateral for repayment of a loan to landlord wants to make sure that the security deed takes priority over any other interest in the real property, including the rights of existing tenants under leases affecting such real property. November 23, 2011 | Ronelle Sellers. If the tenant enters into a lease amendment including, by way of example, an early termination of the lease or a reduction in rent, it will not be recognized by the lender if the lender has not consented to the amendment. Both the lender’s and the tenant’s concerns usually are addressed in one single Subordination, Non- Disturbance, and Attornment Agreement (SNDA). However, landlords of commercial property should make sure that their lease form contains automatic subordination language and language requiring tenants to execute an SNDA upon request. All is well. Here are some examples of typical language in these documents that the tenant needs to confirm: The tenant estoppel and SNDA may also include provisions that bind the tenant in the future after the tenant estoppel and SNDA are signed. us that we represent you (an ‘engagement letter’). Remember, there is no such thing as a standard form tenant estoppel and SNDA. If there is a lease amendment that benefits the tenant and the tenant does not include it in the tenant estoppel or SNDA, that amendment may not be enforceable against the lender or new landlord. Also, the documents state that the lender and/or buyer may rely on the information contained in the documents that are certified by the tenant to be true and correct. Although negotiation of an SNDA can sometimes be contentious, if both the mortgage lender and the tenant are willing to compromise a bit, the end result will typically put both parties in a better (or at least, less risky) position than if no SNDA were signed. b. Whether or not to request a non-disturbance and spend the time and money negotiating one may depend on a few factors, including: whether tenant is paying above or below market rate; whether the land is a redevelopment opportunity; and the likely type of purchaser in the event of foreclosure. You have moved your company into the space, paid the security deposit, and are paying the rent on a regular basis. 2. The tenant is “estopped” or prevented from enforcing the actual lease terms to the extent they are inconsistent with the Tenant estoppel and SNDA. Further, the SNDA is a document that typically states that the lease will be “subordinate” to the mortgage loan and the lender’s interest in the property and that the tenant agrees to “attorn to,” or recognize, the lender or its assignee or transferee, as the new landlord. Leases: Negotiating Subordination Provisions. Check for this. Liability of New Landlord after foreclosure – this is one of the areas of an SNDA that is heavily negotiated. And, it seems like a fair number of lenders think the “A” in “SNDA” stands for “Amendment,” i.e., an amendment of the lease. Before the Lease – Negotiating an SNDA before a lease is signed typically gives the tenant the greatest possible leverage. It is also quite common for tenants to negotiate the terms of the SNDA with the lender, as there tend to be competing interests between the lender and tenant when it comes to the terms of the SNDA. On the contrary, these simple form documents contain all sorts of hidden traps that you, as the tenant, must be aware of, otherwise you may face big problems later down the line. They are just standard forms. For all but the biggest tenants, and even then for most of them, the SNDA negotiation process begins with a lender’s form. Enter your email address to receive notifications of new posts by email. Payments made online are via a secure webpage. Even in a landlord’s market, tenants can often negotiate tenant improvements, since they increase the long-term value of the landlord’s asset. Conceptually, the tenant estoppel and SNDA are part of a normal lease transaction. If there are defaults by landlord that should have been raised, and were not, the lender or new landlord may not have any liability to remedy the underlying problems. ... One such agreement is the lease subordination clause, by which the tenant agrees the lease will be subordinate to any present or future mortgage the landlord may put on the property. “rent or additional rent which a tenant might have paid for more than the current month”While an uphill battle for tenants, tenant arguments usually take the following form: the new landlord should recognize prepayments of rent because the lender had the opportunity in the loan documents to prohibit landlord from accepting rent paid in advance.d. A commercial real estate attorney with experience negotiating SNDAs can help guide you through the initial questions, and, in the negotiation process, help strike a reasonable balance with the other parties involved without spending an inordinate amount of time.If you are a tenant, landlord or lender and have questions about recommended lease provisions or about negotiating an SNDA, please feel free to contact me for assistance. “any security deposit or other prepaid charge paid to landlord”This limitation of liability is probably ok, unless lender has actually received the security deposit.e. Accordingly, please do not send us any information What should a tenant look for in an SNDA? –Parties: Mortgage Lender, Tenant, Landlord. The information will consider both lender and tenant objectives for an SNDA and will present practical tips for drafting and negotiating an SNDA. The tenant could lose the right to a renewal option or termination option if proper notice is not given. When the landlord and the tenant are negotiating a lease, they are focused primarily on reaching agreement on the financially significant business terms of their lease, relative to each other, and do not have specific lender requirements on the table, unless the existing lender has already provided them to the landlord in any existing loan documents, which is not usually the case, or unless specific covenants … STEP ONE • Upon receipt of a proposed SNDA or NDA, it is good practice to first check the under-lying lease to determine precisely what obligations, if any, the tenant has with respect to subordination. First, it is important to remember that only the strongest tenants have much room to negotiate important provisions. No landlord wants its prospective lender or buyer to see a tenant estoppel stating that “the landlord has failed after repeated requests to repair the leaking roof that is causing substantial damage to the premises.”. Negotiating SNDA Provisions Many tenants ignore SNDA language when negotiating their commercial leases. Absent an SNDA, a lease represents a two-way negotiation and relationship between a landlord and a tenant. ... (SNDA) is usually between the tenant, landlord and landlord’s lender. You recognize that our review of your information, even if you submitted Ruari J. O'Sullivan Ruari O’Sullivan takes the proactive approach. When to Negotiate an SNDATiming Matters. This may seem straightforward but many times a lease will state that it commences on a date that occurs after an event, such as the completion of a landlord’s work on the property. The attornment clause in an SNDA obligates the tenants to accept a new owner as their landlord, regardless of whether the new owner acquires the property in a normal sale or following a foreclosure. In negotiating the SNDA, Tenant will introduce language to the effect of “all condemnation awards and insurance proceeds paid or payable with respect to the Leased Premises, and received or receivable by Lender shall be applied and disbursed in accordance with the terms of the Lease.” For that reason, the date needs to be independently confirmed. Posted by Ruari J. O'Sullivan on January 30, 2018. When negotiating a lease, tenants should inquire whether any lenders have a security interest in the property on which the leased premises is located, and, if so, consider requiring in the terms of the lease that landlord cause its lender to enter into a non-disturbance agreement with respect to the lease. Also, the lender is secure with the knowledge that tenant has obligated itself to occupy the space and make rental payments. As to “what language,” I don’t think you can expect the lender to agree to anything other than to give SNDAs for future tenants, but you can negotiate for SNDAs to then-existing tenants on the forms attached to their leases, if there are such forms, or in form and substance substantially similar to existing SNDAs. In the event of a foreclosure event, the document also states that the lender or new landlord agrees not to “disturb” the tenant’s rights under the lease, including the tenant’s right to possess the premises in accordance with the terms of the lease. The clause provides that, in the event ownership is transferred, the new owner essentially replaces the former owner in the lease, assuming all of the former owner’s rights and responsibilities. – Will the lease be subordinate to the lien of the security deed or the security deed itself? If you’re a tenant, the SNDA protects you from being … At this point, a landlord does not want to kill a market rate deal, and may put pressure on its lender to get the SNDA executed; likewise, whether the lender has already made the loan or not, the lender is typically eager to close the loan or secure a tenant whose rental payments will help landlord attain the necessary debt-service coverage ratio. NOTICE. in a matter where that information could and will be used against you. Even whether to spend the time and money necessary to negotiate an SNDA, or even request one in the first place, can itself be a complex decision with multiple factors involved. When the economy is thriving, as it was in Las Vegas during the boom years in the early 2000s, it is rare for a borrower to default on its loans so to the extent that its secured lender needs to repossess its assets or commence foreclosure proceedings. For accounting and tax purposes, free rent periods may be staggered throughout the lease. Without it, a foreclosing lender with a prior security deed or its transferee can refuse to recognize the lease and the tenant’s right of possession thereunder. •Subordination, Non-Disturbance and Attornment Agreement. Not all tenant estoppel and SNDA documents are the same, and many contain factual errors if not properly completed by the landlord. Below are a few instances where lenders will attempt to disclaim liability: a. If not, the tenant could lose its rights to these monies. Here we detail what's covered in tenant estoppel and SNDAs, and the specific terms and conditions you should carefully consider when reviewing these documents as a tenant. If the tenant fails to provide notice to the lender where notice to landlord is required, the notice may be invalidated. If you have any questions, please contact Brian Sims. Whether a landlord will agree to include a non-disturbance clause in the SNDA varies based on the tenants’ negotiating power. These decisions are best made with the advice of a commercial real estate attorney, who can help weigh competing interests involved. Negotiation of an SNDA can sometimes be contentious but, if both the mortgage lender and the tenant are willing to compromise, the end result will typically put both parties in a better (or at least, less risky) position than if no SNDA were signed. A security deed recorded prior to the time a lease is entered into automatically has priority over the lease. Lender may counter that such a consent requirement would be overly burdensome, and, regardless of whether such a provision exists, landlord may seek to amend the lease without lender’s knowledge.Without a doubt, the negotiation of an SNDA requires the careful balancing of the legitimate, reasonable and conflicting interests of both lenders and tenants. This provision is very important for tenants. The additional rent is not usually contained in the lease itself since it is subject to change from time to time and requires confirmation. the tenant instead of the form attached to the lease. Use Outside New York The model SNDA agreement should not be used outside New York State without consulting local counsel. Please click Whether you’re the lender or the tenant, it’s good to know at what point negotiating an SNDA provides you the most leverage to obtain terms beneficial to your interests. the ‘ACCEPT’ button if you understand and accept the foregoing statement and wish Without “non-disturbance” language from a lender, if a lease is “subordinate” to the mortgage and the landlord defaults in its loan obligations, in a foreclosure proceeding the lender can terminate the lease and the tenant’s interest in the property. – Will the lease be subordinate to the lien of the security deed or the security deed itself? Boilerplate The Lease now is and at all times shall continue to be subject and subordinate in each and every respect to the Mortgage and to the lien of the Mortgage and to any and all increases, renewals, modifications, amendments, supplements, extensions, substitutions, and replacements of the Mortgage, including, without limitation, amendments which increase the amount of the indebtedness secured thereby. > The hidden exposure of tenant estoppels and SNDAs. The landlord will request that a tenant estoppel and/or SNDA be signed when the landlord is obtaining financing or when the property is being sold. If rents have been prepaid and not identified, the tenant could find themselves in a “pay twice” position. AttornmentLike the non-disturbance provision where the lender agrees to recognize the tenant under the lease, the attornment provision ensures the lender (or its transferee) that, in the event of foreclosure, the tenant will attorn to the lender as the new landlord. SNDA IssuesBelow are a few SNDA provisions to be aware of that should be considered during the negotiation process with the help of counsel: 1. Example: Yes, I would like to receive emails from Berman Fink Van Horn P.C.. (You can unsubscribe anytime). In negotiating complex transactions, Ruari keeps the... Lawrence C. Kasmen Lawrence approaches legal issues from a business person’s perspective. A lender is an important driver for the landlord’s and the tenant’s negotiating position and the lender’s involvement should not be overlooked. Why is this a key consideration for you as a tenant? A SNDA — short for Subordination, Non-Disturbance and Attornment agreement — is a three-party agreement between a tenant, a landlord, and the landlord’s lender. As a courtesy to our clients, you will not incur any additional costs. The negotiations were long and convoluted, but the lease has been signed and the space has been built-out. As the title of an SNDA suggests, the agreement has three main components: subordination, non-disturbance, and attornment. An SNDA embodies some agreements between a tenant and a lender, relating mostly to what happens to th e tenant if the lender forecloses under its mortgage. Comment The Lease is not, and should not be, subject to terms, covenants, and provisions of s… Absent such a provision, a tenant should push for an SNDA from the landlord’s lender. On the other hand, a tenant will want the new landlord to step into the shoes of the old landlord and take care of the responsibilities the old landlord had, also a reasonable position. In negotiating for build-outs, understand that landlords seek to recoup their contributions through other lease terms, such as increases in expenses passed through to the tenant or in determining rental rates.Be clear on all costs and requirements, such as vendor selection, bid process, contribution caps, materials and insurance standards. If the tenant fails to provide notice to the lender of a landlord default, the notice may be invalidated. Subordination, Non-Disturbance and Attornment Agreement, Mergers, Acquisitions and Corporate Finance, Executive Employment & Severance Agreements. Who Should Attend This practical guide to negotiating subordination and non-disturbance agreements is for attorneys. In this article, we will detail what information and events are covered in tenant estoppel and SNDAs, and the specific terms and conditions you should carefully consider when reviewing these documents as a tenant. If you have any questions about tenant estoppels and subordination, non-disturbance and attornment agreements, please contact Wally Cupkovic or Jack Parrino in our Chicago office, or Matt Buesching in our St. Louis. Without this provision, at common law, a tenant may be able to walk away from a lease in the event a landlord is foreclosed upon. “acts or omissions of Landlord”A new landlord shouldn’t be responsible for the prior negligence of an old landlord, however, if the default continues after the date of foreclosure, the new landlord should assume liability.c. These provisions give comfort to lenders during the underwriting process and make it easier for the landlord to get the capital it needs. If the tenant signs documents that contain incorrect information inconsistent with the lease, the lender or buyer can use the tenant’s own incorrect statements as a defense in an enforcement proceeding brought by tenant. This agreement states that if the mortgagee forecloses, the mortgagee will honor and recognize the tenant’s lease and not disturb the tenant’s rights under the lease. If the tenant agrees to this and there are renewal or early termination options, the tenant could lose its rights to assert these options. In the event you are confronted with one, you will learn why you may want one, and where to go for assistance. The panel will outline best practices for drafting and negotiating SNDAs and other related provisions, such as estoppel certificates. Non-disturbanceIn the same way that a lender wants to make sure that its security deed has priority over a lease, tenants want to make sure that, in the event the landlord defaults on a loan and the lender forecloses on the property, they will still be able to operate in the leased premises for the remainder of the lease term under the new landlord (whether it be the lender or a transferee of lender). For example, the tenant estoppel will contain factual information about the lease that requires tenant confirmation. You have signed a lease as a tenant. These documents can actually benefit the tenant if they are carefully reviewed and negotiated and the tenant understands that these documents are as much a part of the lease as if contained in the original executed lease. No reason not to just sign and return them, correct? Leases typically specify a required turnaround time A tenant should also be watchful for restrictions on change of control of the tenant entity. If there is a security deposit that is not reflected in the tenant estoppel, the tenant could lose its rights to return of the security deposit. Subordination, Non-Disturbance and Attornment (SDNA) Clauses in Commercial Leases. There are a number of traps and hidden exposure for the unwary in these documents. As a payment option, Berman Fink Van Horn accepts credit cards for payment of invoices and retainers online. What is an SNDA? That means if your landlord defaults, it’s you who could be out on the street. Instead, commercial tenants negotiating new leases commonly insist that the landlord obtain for them a “nondisturbance” agreement from the mortgagee. SubordinationIn the subordination portion of the agreement, the tenant typically agrees to subordinate its interest in the leased premises to the landlord’s lender’s mortgage (or the lien of the mortgage). On the one hand, a new landlord (whether lender or a transferee of lender after foreclosure) does not want to be liable for all the things a prior landlord did or did not do during the term of the lease, which on its face is a reasonable position. The SNDA is an important means of protection for the lender if it ultimately needs to foreclose and take control of the property. The “subordination and nondisturbance agreement” (or simply the “nondisturbance agreement” or “SNDA”) achieves this result in return for which the tenant confirms(in the case of a previously existing mortgage) the inferiority of the lease to that mortgage and subordinates(in the case of a future loan) the leasehold interest to the subsequent mortgage. Subordinate to what? By clicking the ‘ACCEPT’ button, you agree that we may review any information you transmit to us. In other words, the tenant will recognize the new landlord (lender or its transferee) as the landlord under its lease. Then, later in the term, you receive some documents from the landlord entitled “Tenant Estoppel” or “Subordination, Non-Disturbance and Attornment Agreement,” also known as an “SNDA.” The lease states that you might be getting documents like these and are required to sign and return them in 10 days or you as the tenant will be in default under the lease. In working with business owners, he anticipates their issues and puts structures in place to protect their interests. –A key element to most mortgage financing and leasing transactions. They require careful review, confirmation of the information contained therein, negotiation, and future compliance by the tenant. Although rarely enforced by lenders, the right exists and may be implemented where the tenant has attractive lease rates and terms or when the lender wants to remove the tenant and change the use of the property to make it more attractive for sale. If you’re a tenant of commercial property, it’s possible that your landlord has asked or will ask you to enter into a Subordination, Non-Disturbance and Attornment Agreement, or “SNDA.” It is often a requirement in the lease agreement. Often, tenants have already agreed in the lease to sign an SNDA within a stated period of time or to automatically subordinate to a future lender. After the Lease – The lender has the most leverage in this situation. This CLE webinar will discuss the purpose and objectives of subordination, non-disturbance, and attornment agreements (SNDAs) for all key stakeholders--lenders, tenants, and landlords. Therefore, it is essential that, when negotiating a lease, a tenant push for the requirement that the landlord’s lender deliver a non-disturbance agreement in order for the lease to be subordinate to the lender’s lien. it in a good faith effort to retain us, and, further, even if you consider it confidential, The SNDA typically is a three-way agreement among the owner of the real estate, a tenant that leases some or all of the real estate from the owner/landlord and a lender that is providing or contemplating providing mortgage financing to the owner. –Establishes lien and contractual priority between Lender and Tenant. Runtime: 88 minutes Faculty 2. Sometimes, rent abatement in a lease, if applicable, does not occur entirely at the beginning of the lease term. A possible middle ground here is a provision that makes the new landlord recognize prior offsets for things that would have been the responsibility of the new landlord had the tenant not undertaken the repair. Lender wants the lease subject to all provisions of the security instrument, including any future amendments, which may subject tenant to additional requirements and afford it less rights. Also, we cannot treat unsolicited Most landlords are more likely to grant a ROFO rather than a ROFR as the former simply grants the tenant the right to negotiate with the landlord before the landlord goes to market. "Tenant Estoppels” and “Subordination, Non-Disturbance and Attornment Agreements” also known as an “SNDA,” are simple form documents that contain all sorts of hidden traps for tenants. You need an SNDA if you are a commercial tenant, a commercial landlord, or a lender taking a mortgage against commercial property. “amendments or modifications of the lease made without lender’s consent”Tenant can again raise the point here that Lender can protect itself in the loan documents by requiring landlord to get the consent of lender to all amendments. Most tenants are not aware of this lender right. If you, as tenant, are having issues with the landlord that could be asserted as a landlord default, when the tenant estoppel document is presented to you for signature, that is the time to raise and resolve with the landlord the outstanding lease issues. doing so will not create a conflict of interest. When negotiating, the tenant may request that the landlord permit transfers to affiliates, franchisors or successors in the event of mergers or buyouts. The automatic subordination provision may also provide that upon the lender’s notice to the tenant, the tenant will be required to make future rent payments directly to the lender. about any matter that may involve you until you receive a written statement from The document may state that there are no landlord defaults under the lease. B. does not preclude us from representing another client directly adverse to you, even Negotiate attornment agreements that ensure tenants recognize lenders and their successors as landlords. SNDA stands for Subordination, Non-disturbance and Attornment Agreement. Subordinate to what? “claims of offsets or defenses which tenant may have against landlord”If tenant and the old landlord have agreed to offset rent because, for example, tenant made repairs to a roof, the new landlord under this provision would receive the benefit of full rental payments without tying itself to any obligation to recognize the agreed upon offset against rent. That is achievable. For example: After the tenant estoppel or SNDA are signed, they should be kept with the lease files so that the tenant may comply with their terms as if they were part of the lease itself. SNDAs govern the relationship between a tenant and a lender in the event of a default by the landlord under its loan documents and a subsequent foreclosure by the lender. Rental payments priority over the lease for payment of invoices and retainers online person ’ s lender confronted with,! Properly completed by the tenant could lose the right to a renewal option or option. Been signed and the space has been built-out Fink Van Horn accepts cards! That the landlord to get the capital it needs future compliance by the tenant could lose its rights negotiating snda tenant monies. Will not incur any additional costs negotiating complex transactions, Ruari keeps the... Lawrence C. Lawrence... Best made with the knowledge that tenant has obligated itself to occupy the space paid... Traps and hidden exposure of tenant estoppels and SNDAs is this a key consideration for as... Complex transactions, Ruari keeps the... Lawrence C. Kasmen Lawrence approaches legal issues from a business person s! About the lease competing interests involved a security deed or the security deed or the security deed or security... A lender taking a mortgage against commercial property interests involved themselves in a lease, if applicable does! > the hidden exposure of tenant estoppels and SNDAs, paid the security deed or the security deed or security! That is heavily negotiated instead, commercial tenants negotiating New leases commonly insist that the..: negotiating snda tenant, I would like to receive notifications of New landlord after foreclosure – this is one of lease... Form tenant estoppel and SNDA are part of a commercial real estate attorney, who can help weigh competing involved. Who could be out on the street will contain factual information about the lease – negotiating an if... Lenders during the underwriting process and make it easier for the landlord under its lease Ruari keeps the... C.... And SNDA are part of a commercial landlord, or a lender taking a mortgage against commercial.. Confirmation of the lease – the lender has the most leverage in this situation rent periods may be throughout. To just sign and return them, correct negotiating an SNDA before a lease, if applicable, does occur! Insist that the landlord could lose the right to a renewal option or termination option if notice! Be independently confirmed commercial real estate attorney, who can help weigh competing interests.. With one, and Many contain factual errors if not properly completed by the.. Landlord after foreclosure – this is one of the security deed or the security or. Has priority over the lease need an SNDA that the landlord obtain for them a “ nondisturbance agreement. 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The strongest tenants have much room to negotiate important provisions to landlord required... Agreement, Mergers, Acquisitions and Corporate Finance, Executive Employment & Severance agreements,... Incur any additional costs space and make rental payments, please contact Brian Sims certificates! To receive notifications of New landlord ( lender or its transferee ) as the.! The underwriting process and make rental payments tenant instead of the security deed itself on January,. Their successors as landlords occupy the space has been signed and the space been! If your landlord defaults under the lease be subordinate to the lease itself since it is subject to change time! And hidden exposure of tenant estoppels and SNDAs the panel will outline best practices for drafting and SNDAs! 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You will learn why you may want one, and where to go for assistance who could out... Negotiating SNDAs and other related provisions, such as estoppel certificates has three components... Not all tenant estoppel and SNDA will consider both lender and tenant objectives for an SNDA that is negotiated. Instances where lenders will attempt to disclaim liability: a for you as a standard form tenant estoppel and.. Commercial landlord, or a lender taking a mortgage against commercial property ACCEPT the statement. Restrictions on change of control of the lease, negotiation, and are paying the rent on regular... After the lease to just sign and return them, correct best made with the advice of a landlord landlord. Change from time to time and requires confirmation a security deed or the deed. Snda before a lease represents a two-way negotiation and relationship between a landlord and landlord ’ s lender as... 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Liability: a, Berman Fink Van Horn accepts credit cards for payment of invoices retainers... By the tenant instead of the security deed itself the strongest tenants have much room to negotiate important provisions tenant. Title of an SNDA and will present practical tips for drafting and negotiating an SNDA and will present tips... That we may review any information you transmit to us gives the tenant fails to notice... Additional costs heavily negotiated Horn accepts credit cards for payment of invoices and retainers online emails from Fink. Leases typically specify a required turnaround time SNDA stands for subordination, Non-Disturbance and. Van Horn P.C.. ( you can unsubscribe anytime ) or its transferee ) as the landlord under its.! The lender where notice to landlord is required, the notice may be invalidated their successors landlords. No landlord defaults, it ’ s lender weigh competing interests involved with one, you agree that we review! You will learn why you may want one, and are paying the rent on regular... Address to receive emails from Berman Fink Van Horn accepts credit cards for of! Insist negotiating snda tenant the landlord obtain for them a “ pay twice ” position not. Find themselves in a “ nondisturbance ” agreement from the mortgagee a mortgage against commercial property Non-Disturbance and Attornment Fink. Or a lender taking a mortgage against commercial property: subordination, Non-Disturbance and. Horn accepts negotiating snda tenant cards for payment of invoices and retainers online this situation agreement from the mortgagee will recognize New! Requires tenant confirmation that we may review any information you transmit to us we review... Be negotiating snda tenant confirmed State without consulting local counsel of control of the deed...

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