# To increase the rent or not?



## Overandout (Nov 10, 2012)

I open this thread with two intentions:

1) To check with others that my understanding of the legal situation is correct, and,
2) To obtain informed opinions on the morality of the situation! 

I have a flat rented out (contract signed under the previous law to the reformed law existing today) and the contract ends next month after 5 years.

Obviously we have had 4 opportunities to adjust the rent during this time in line with the IPC; the first was a small rise which we did not apply, the second a small decrease which effectively cancelled out the previous increase, so we simply did not apply that either. The third and fourth have also been small increases, but which we have not applied. 

So our tenant still pays the same rent as he did in 2013.

Legally, upon completing 5 years, we can (as far as I understand) give the tenant 30 days notice that we do not want to extend the contract for an additional year under the same conditions, as would automatically happen if we remain silent.

So, the big questions are “do I put the rent up to market rate so that I am not effectively acting as a charity?”, “do I leave it as it is and hopefully keep my reliable, quiet tenant but continue to lose money month after month?”, or “do I try to negotiate a mutually acceptable middle ground?”.

Clearly each has its pros and its cons. 

Option 1 has the risk that he leaves and we have to rent it out again with the hassle and cost and risk that that entails, so that is not really an option.

Option 2 makes me feel a bit stupid. The market rate for my flat is considerably above the mortgage I am paying, but at the moment I lose money every month because the rent is below the cost. I don’t see why I should continue in this situation when the law does not oblige me to do so.

So that leaves option 3… I know there are people on here that rent… what would your thoughts be as tenants in this situation?

Also, if anyone thinks that I am wrong in any of the legal rights and obligations please let me know!


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## baldilocks (Mar 7, 2010)

My personal view is that you should go with option 3.


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## Overandout (Nov 10, 2012)

baldilocks said:


> My personal view is that you should go with option 3.


As would be expected I suppose.

But this is where the "morality" comes into play...

Legally, if we simply extend the contract without renegotiation, we can increase the rent by 0.6%.

However, if we look at similar properties on Idealista / Fotocasa close to ours and go for the maximum comparable rent we could be asking around 30% more. 

Obviously, asking for a 30% increase in one go is not a fair trick to play (although there are landlords that would do it in Spain) although it would be legal.

So to try to be more reasonable we could take an average rent for the similar properties, and in this case we can see that the average market rate is around 20% higher than the current rent.

But still, 20% seems a bit steep also if you want to keep a good tenant.

And if we look at the lowest rent being asked for a similar property, we are still looking at around 8%. And to be honest that particular property is only similar in size and location, it does not have the same facilities as ours. But even so, this is more than 10 times inflation...

The world has gone crazy and I am not sure how crazy I am!!

Would you feel you were being taken advantage of if your landlord asked for 10% higher rent?


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## mrypg9 (Apr 26, 2008)

We've rented our house for nine years, now into the tenth.
First year's rent was 2300 euros. We paid six months in advance. At the end of Year 1 I said 1500 euros paid in advance or we go.
We are now in our last year of a five year contract, annual rent 1000 euros for large house, pool, double plot, 'good' area.
We take care of renewing appliances and minor repairs. The house is kept in excellent condition.

If we stay for another couple of years it will be for 1000 euros and our landlord would be crazy to turn us down. The house was rented unfurnished (we brought all our furniture from the UK)
He may not find new tenants for a few months. The new tenants may not pay rent, may trash the place..
Our landlord knows us. He trusts us.

Question is: do you know and trust your tenants? Are they reliable? Do they pay the rent on time and look after the place? Is the extra rent you could demand worth spoiling a good relationship?

I was a landlord in a previous life. I would not raise the rent depending on the answers to the above questions .


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## mrypg9 (Apr 26, 2008)

Oh and of course...would you starve without the extra money??

I wonder what value our landlord would put on the peace of mind he has from having good reliable tenants....


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## Overandout (Nov 10, 2012)

mrypg9 said:


> We've rented our house for nine years, now into the tenth.
> First year's rent was 2300 euros. We paid six months in advance. At the end of Year 1 I said 1500 euros paid in advance or we go.
> We are now in our last year of a five year contract, annual rent 1000 euros for large house, pool, double plot, 'good' area.
> We take care of renewing appliances and minor repairs. The house is kept in excellent condition.
> ...


Thanks, these are indeed the considerations I need to contemplate.

To be honest, our situation is a bit different in that this is Madrid, most places get rented within a week or two of being advertised, so being without a tenant is extremely unlikely for us.

And really, we do not know our tenant, nor how our property is being kept. He pays, never contacts us and we stay away. I haven't seen the interior of the property for 5 years.

Is the extra money worth spoiling a good relationship? Sadly I have to answer that with another question (which is the one I am struggling with); is losing money month after month worth it for the sake of a good relationship?

When we rented the place out, we had no choice but to lose money, now we have a choice.... a tough one!! :lol:


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## Isobella (Oct 16, 2014)

Unless you are running a charity I would go with market forces. Seeing as it is less than the mortgage you are paying what would happen if interest rates suddenly increased. With long term lets there are costs. Repairs and renewals unless you have some agreement that the tenant does them you say 'A good relationship' but don't know him so just a business arrangement. Increase but don't get greedy.

Have rented out on the Costa and in UK always through an agent, never had any personal contact at all with the tenant. Always had 3 monthly inspections too.


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## mrypg9 (Apr 26, 2008)

Overandout said:


> Thanks, these are indeed the considerations I need to contemplate.
> 
> To be honest, our situation is a bit different in that this is Madrid, most places get rented within a week or two of being advertised, so being without a tenant is extremely unlikely for us.
> 
> ...


Ahhh...now that's a different situation from ours.
We have a very good relationship with our landlord, in fact a friendly one. He lives in Austria, has another house here he stays in when he visits...He drove me to the airport when I went to the UK last week, fixes small things on my car, takes me to lunch occasionally...
He can see how well the house and grounds are kept when he visits. He never comes in the house unless invited but we let him keep car he uses on his infrequent visits in the very spacious basement garage which he has equipped as a small auto workshop with inspection facilities, hoist, all tools. If I were a mechanic he'd let me repair my car there!!
He's had bad experiences with previous tenants and won't let the house again when we move.
Both parties to this deal are very lucky.

If I were in your position I think I would raise the rent. Not sure by how much, maybe in stages if he signs for five years?
After all, for all you know, your flat may not be looked after well. Whatever, if you agree a new contract with this tenant, you'll inspect it, I'm sure...


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## Overandout (Nov 10, 2012)

Isobella said:


> Unless you are running a charity I would go with market forces. Seeing as it is less than the mortgage you are paying what would happen if interest rates suddenly increased. With long term lets there are costs. Repairs and renewals unless you have some agreement that the tenant does them you say 'A good relationship' but don't know him so just a business arrangement. Increase but don't get greedy.
> 
> Have rented out on the Costa and in UK always through an agent, never had any personal contact at all with the tenant. Always had 3 monthly inspections too.


Sometimes it feels like we are running a charity!

I made a free choice to buy the place, then rent it out, so I can't complain, but you make a good point. Rent increases are protected by law for long periods (in our case 5 years), whereas mortgage costs fluctuate with the market at the will of the banks. So the tenants always enjoy a greater level of protection than the owners.

So, although our mortgage has not altered much in the 5 years that we have rented out the property, we are at the mercy of the banks for the next 5 years and need to take that into account when fixing the new rent. Today we may not starve if we don't increase the rent, but who knows what will happen with interest rates in 3 years time?


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## xabiaxica (Jun 23, 2009)

Overandout said:


> I open this thread with two intentions:
> 
> 1) To check with others that my understanding of the legal situation is correct, and,
> 2) To obtain informed opinions on the morality of the situation!
> ...


When did the tenant move in?

If after June 2013. a new contract should have been negotiated after 3 years. edit - just saw that you say that it was before the current law!

I moved a few months ago because my 3 year contract was coming to an end, & it became clear that the landlords were intending a big hike in rent or wanting new tenants. They were becooming difficult not just with me, but with other tenants whose 3 years were coming close.

Having said that, as a tenant I'd expect some kind of increase in the new contract, if market forces dictated that I was now paying below the going rate.

I'd suggest talking openly with the tenant, explain the mortgage situation, maybe find out what local agents would suggest as a rental fee, & see if you can find middle ground. You don't want the hassle of looking for a new tenant & probably the tenant doesn't want the hassle of moving.


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## Gran Erry-Bredd (Nov 1, 2016)

You don't know your tenant, you don't know if your property is being kept in good order and you haven't seen the interior of your property for 5 years. And you're too timid to speak to your tenant of YOUR PROPERTY about the maybe perhaps possibility of a slight increase in rent. What a load of claptrap.


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## Overandout (Nov 10, 2012)

Gran Erry-Bredd said:


> You don't know your tenant, you don't know if your property is being kept in good order and you haven't seen the interior of your property for 5 years. And you're too timid to speak to your tenant of YOUR PROPERTY about the maybe perhaps possibility of a slight increase in rent. What a load of claptrap.


That's interesting. Do you consider an increase of between 10 and 30 times the rate of inflation to be a "slight increase".

Would you as a tenant not feel agrieved at all by such a proposal?

And by the way, I do not need to be friends with my tenant, he has the right to enjoy the property without me visiting it or calling him every few months. That's what I expected from my landlords when I was a tenant.

He pays religoulsly, we have had no complaints from the neighbours or community and so have no reason to believe that he is doing anything untoward. For me that is fine and I am quite happy with the situation.


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## Overandout (Nov 10, 2012)

I have to thank Gran E B for that post. 

I have been thinking about it a lot and that was exactly the intention of this thread (to get thought provoking responses).

It was the word “timid” which got me thinking. And I have realized that it was close to the truth.

But, rather than timidity, the feeling I have is more akin to guilt.

I actually do feel bad about going along with this ultra-capitalist bubble of rental price hikes, which eventually are not going to be beneficial to the country’s economy and will almost certainly contribute to yet another catastrophic crash in the housing market. To increase a rent by more than 10 times the increase in salaries over the same period seems initially excessive to me.

But I have come to the conclusion that I have to judge my case on its individual merits and try to distinguish between self interest and “the greater good”.

Sadly, I personally will gain nothing by donning a virtual Che Guevara cap and maintain the rent at its current level for the benefit of my tenant and the for the good of society. The capitalism around me will absorb and nullify any such gesture and I will eventually just lose out at a personal economic level.

If, on the other hand the tenant was on a low income, with kids, and would be on the street if I put up the rent, I would think differently. But it is not the case.

So, I think I will indeed propose an increase in the rent in line with the lower end of the market trend (not to be greedy) and hope that it doesn’t make him think of leaving. In fact I hope he thinks like Gran E B and sees it as just a “slight increase” (although I note that Gran E B actually is in the UK so may not be really aware of the situation in Spain).

So I apologize in advance to society for my contribution to the next “burbuja inmobiliaria” but I will be adopting (to a certain extent) the tried and tested “I’m alright Jack” approach as advocated by Granny B.

Hence a certain amount of guilt.

Thanks to the rest of you also for your posts!


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## Horlics (Sep 27, 2011)

It's your asset and you are not looking after it, you say it's not been checked/inspected for years.

I would... ask to meet the tenant at the property for a long overdue check on the state of the place. Weigh up the costs involved in changing tenants based on what you see. It's likely the place will need totally redecorating to make it fit for putting on the market, along with other possible expenses such as renewal of white goods, etc. You'll also have to pay an agent a fee (although I know that is sometimes passed to tenants in Spain).

Propose alignment to current market rates, less a convenience discount for staying with things as they are, which would probably mean meeting half way, as long as that amount covers all your costs.

When feeling timid, remember you have a responsibility to your family and subsidising someone else shouldn't feature in that.

If feeling too timid, I would... put it in the hands of an agent who holds a deposit and carries out an inspection every 3 months. Tell the agent that the expectation will be market rate and that increases with market rate will be the norm. You'll be paying a management fee but the result should be that in 5 years from now you'll be charging the market rate, not a 5 year old rate, and you'll know that the property is being well maintained.


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## Pesky Wesky (May 10, 2009)

I like this thread. I like the honesty that Over and Out has shown about the situation and his (I think _his_) feelings and the answers have been interesting although sometimes expressed overly bluntly. 
My own view is the same as some others and what Over and Out has also expressed; that the property owner has to adapt to the market to a certain extent, so if there is a generalized economic downturn then rents will usually reflect that. We are still not out of the woods in Spain, but this situation affects both owners and renters too, so whilst renters are still not earning great amounts of money they are, in general earning more and owners can start to think about not making losses and maybe making a little money - after all wasn't that the aim of buying the property?
So time to put prices up Over and Out. If you are happy with the tenants, negotiate with them, but in order to find out if you are happy or not you have to go in and assess. Be honest and firm and they won't have reason to complain.


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## Overandout (Nov 10, 2012)

Thanks Horlics but I think you may have misunderstood!

It was Gran EB who decided I was too timid to speak to the tenant !

I am not at all timid. Quite the opposite according to my wife!!

I am just trying to gauge a fair ball park to pitch at based on people's comments.

The property hasn't been inspected because there has been no need to do so (and because we were living abroad for most of the rental period).

We also have no agent fees because it is rented through the local Municipal Housing Scheme run by the town hall. We have approached them for advice, but they limit their input to giving us the legal IPC figures and simply state that the "commercial part of the agreement" is down to the landlord and tenant. Understandable really given that it is a free service.

Good point about the decoration though. If I was the tenant and my landlord proposed a price increase I would want something in return, like a fresh coat of paint on the walls. Not sure about white goods though... I can't see why we would replace them if they're still working?

I have set up a meeting with the tenant for this weekend (just in case anyone else thinks I am too timid!!)


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## Isobella (Oct 16, 2014)

Don't feel guilty, take it that the tenant has been lucky to have the low rent until now. He could have more money than you, he could even be subletting and pocketing the difference. Agents fees are ok. if they are a good one. They get a higher rent and if out of the country arrange everything, can be a necessary expense.

Don't wear a hair shirt, think of your kids


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## Horlics (Sep 27, 2011)

But there is a need to inspect the property. I have a friend who's into BTL in the UK as his only source of income. When he was starting out he didn't inspect a property for 2 years. When the tenant moved out the owner discovered that the smoke alarms had been covered in plastic bags and that the tenant had smoked throughout the entire period in the house.

There is ALWAYS a need to inspect, unless you know the tenant very well and trust them.


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## Horlics (Sep 27, 2011)

Overandout said:


> I have set up a meeting with the tenant for this weekend (just in case anyone else thinks I am too timid!!)


OK, so replace timid with guilty then  The rest stands.

Re the white goods. I replaced a fridge freezer for a tenant because he complained that the old was was, well... old, and (and this was the part that made me agree) noisy as well.

Now that you are meeting, it really would be best to keep the tenant you have if possible, I have totally painted and put down at least some new carpets whenever my places have had a changeover. Plus other stuff... bathrooms tend to need new sealant, toilet seats, etc. It really does require a bit of expense to make a place presentable. Not to be underestimated.


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## Overandout (Nov 10, 2012)

Horlics said:


> OK, so replace timid with guilty then  The rest stands.
> 
> Re the white goods. I replaced a fridge freezer for a tenant because he complained that the old was was, well... old, and (and this was the part that made me agree) noisy as well.
> 
> Now that you are meeting, it really would be best to keep the tenant you have if possible, I have totally painted and put down at least some new carpets whenever my places have had a changeover. Plus other stuff... bathrooms tend to need new sealant, toilet seats, etc. It really does require a bit of expense to make a place presentable. Not to be underestimated.




Thanks, Indeed, the cost of renovating and making good for a change in tenant is one of the big drivers in the decision. It's no use to use to gain a few Euros a month on rent but then having a 2,000€ outlay and missing two months income due to the works. 
Although carpets? In Spain? Are you sure? We need to take into consideration that this is a Spanish property in the capital of Spain and rented under Spanish law and practice through a Spanish town hall letting scheme to a Spanish tenant. I did not post this thread in an "expats in Spain" forum to get feedback about UK rentals.... 

I am still not sure what bearing the frequency of inspections has to do with the rent increase?

Are you saying that by some intangible link I have forfeited a right to increase the rent by allowing the tenant to live "unsupervised"?


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## Overandout (Nov 10, 2012)

Pesky Wesky said:


> I like this thread. I like the honesty that Over and Out has shown about the situation and his (I think _his_) feelings and the answers have been interesting although sometimes expressed overly bluntly.


Thanks!

There's no point asking for opinions then disregarding them. 
I will take onboard both the considered thoughtful and relevant comments as well as the potentially alcohol fuelled ramblings of people with no apparent experience!!

But again (a note to all who reply): I was particularly looking for input from landlords and tenants in Spain, not the UK or other countries, I thought that was obvious from the fact I had posted it here, but maybe not.


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## Horlics (Sep 27, 2011)

Overandout said:


> Thanks, Indeed, the cost of renovating and making good for a change in tenant is one of the big drivers in the decision. It's no use to use to gain a few Euros a month on rent but then having a 2,000€ outlay and missing two months income due to the works.
> Although carpets? In Spain? Are you sure? We need to take into consideration that this is a Spanish property in the capital of Spain and rented under Spanish law and practice through a Spanish town hall letting scheme to a Spanish tenant. I did not post this thread in an "expats in Spain" forum to get feedback about UK rentals....
> 
> I am still not sure what bearing the frequency of inspections has to do with the rent increase?
> ...


I was simply saying that a changeover requires some work. Ok, replace "carpets" with "rugs", maybe. Wherever a property is, the point is, some work is usually necessary when putting a place back on the rental market.

The frequency of inspections has nothing to do with rent increase. My point was, it's an asset worth 10s of 1000s and it should be monitored. Most agents think 3 months is sensible. Me, I think less frequent is fine. But there should be some.

No, I am not saying that (your last paragraph), obviously.


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## Overandout (Nov 10, 2012)

Horlics said:


> I was simply saying that a changeover requires some work. Ok, replace "carpets" with "rugs", maybe. Wherever a property is, the point is, some work is usually necessary when putting a place back on the rental market.
> 
> The frequency of inspections has nothing to do with rent increase. My point was, it's an asset worth 10s of 1000s and it should be monitored. Most agents think 3 months is sensible. Me, I think less frequent is fine. But there should be some.
> 
> No, I am not saying that (your last paragraph), obviously.


Thanks for clarifying.

As stated, I am grateful for all the advice.


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## Gran Erry-Bredd (Nov 1, 2016)

I think it's rather harsh but very honest of you to describe your own posts as "alcohol fuelled ramblings".


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## baldilocks (Mar 7, 2010)

Meanwhile in Barcelona:
https://elpais.com/elpais/2018/02/1...?id_externo_nwl=newsletter_inenglish20180224m


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## angkag (Oct 29, 2013)

Depends on area. My landlord has been applying cost-of-living increases to my rent, but they are small increases so not that bothered. But he wants to sell it now and figures an unoccupied property is easier to sell, so I'll be moving out. As I look at other places, I can't help noticing that its going to be marginally cheaper renting a new place as rents have either stayed static or fallen since I arrived 3 years ago.

So take a look at it from the tenants perspective before deciding what to do. Are there lots of other places they can rent ? How does the rent on similar properties compare to what you are charging ?


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## Overandout (Nov 10, 2012)

So, just for those curious as to how this ended...

The "legal" increase of rent over the five years as per inflation index was 2.2%.

We agreed with our tenant to sign a new contract at 7.6% above.

He is happy (the rent is still a bit below market rate for the property), and we are happy as we get more than triple the legal entitlement if we were to have simply extended the existing contract, and we maintain our "perfect tenant".

Thanks all, for the input.


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## baldilocks (Mar 7, 2010)

Overandout said:


> So, just for those curious as to how this ended...
> 
> The "legal" increase of rent over the five years as per inflation index was 2.2%.
> 
> ...


Congrats.


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## Lynn R (Feb 21, 2014)

Overandout said:


> So, just for those curious as to how this ended...
> 
> The "legal" increase of rent over the five years as per inflation index was 2.2%.
> 
> ...


A very good outcome for all concerned, congratulations. There was an article in El Pais a few days ago about how the short term holiday lettings market for apartments has drastically affected rental prices for long term tenants in Madrid, causing a lot of people to have to move further out, so your tenant is probably very relieved to have you as a landlord.


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## Overandout (Nov 10, 2012)

Lynn R said:


> A very good outcome for all concerned, congratulations. There was an article in El Pais a few days ago about how the short term holiday lettings market for apartments has drastically affected rental prices for long term tenants in Madrid, causing a lot of people to have to move further out, so your tenant is probably very relieved to have you as a landlord.


Yes, the holiday lets seem to be what are driving the prices up (certainly the consumer indices are way below the current rent increses), but to be honest, if I was a tenant faced with a landlord threatening to put up the rent by a huge amount becasue "I can get more than double through AirBnB" I would be tempted to call his bluff.
With AirBnB and similar, you may well get double, triple of quadruple the daily rent but whne it comes down to it, not many landlords can be ar*ed to employ cleaners, be around to deliver and collect the keys, apply for licences and deal with all the other hassles involved. I know I couldn't!


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## Pesky Wesky (May 10, 2009)

Well done Over and Out, I was waiting to hear the news!


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## angkag (Oct 29, 2013)

Overandout said:


> Yes, the holiday lets seem to be what are driving the prices up (certainly the consumer indices are way below the current rent increses), but to be honest, if I was a tenant faced with a landlord threatening to put up the rent by a huge amount becasue "I can get more than double through AirBnB" I would be tempted to call his bluff.
> With AirBnB and similar, you may well get double, triple of quadruple the daily rent but whne it comes down to it, not many landlords can be ar*ed to employ cleaners, be around to deliver and collect the keys, apply for licences and deal with all the other hassles involved. I know I couldn't!


Someone I know has two adjoining units at a seafront complex and rented them to a large family for the week. The adjoining units didn't have a connecting door, and after they left it turned out they had sledge-hammered a hole between the two apartments so they could go from one to the other.

This family is still out there folks.......and might be looking to rent from YOU.


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