Regulation of letting agents - monitoring compliance and enforcement framework: updated 2021
Sets out the Scottish Ministers’ framework for monitoring the compliance and enforcement of letting agent regulation in Scotland.
Regulation of Letting Agents Monitoring and Compliance Framework
1. This document sets out the Scottish Ministers' approach to ensuring compliance by those undertaking letting agency work. It makes clear the steps that Scottish Ministers will take to monitor the compliance with the requirements:
- of those required to apply to join the Register of Letting Agents;
- when determining an application to join the Register; and
- of registered letting agents.
2. It also sets out the action the Scottish Ministers may take to secure compliance with the requirements where necessary.
3. Effective monitoring of compliance is an important aspect of the Scottish Government's approach and will help to achieve improved standards of practice and ensure that all letting agents comply with their responsibilities. This will enable letting agents to compete on a fair basis, improve the reputation of the industry and instil greater consumer confidence in using a letting agent.
Principles and objectives
4. Our approach is founded upon the Scottish Government's five principles of Better Regulation. The principles state that any regulation should be:
- Transparent - be open and keep regulations (and how they are implemented) simple and user-friendly.
- Accountable – be able to justify decisions and be subject to public scrutiny.
- Proportionate – only intervene when necessary. Remedies should be appropriate to the risk posed and costs identified and minimised.
- Consistent – rules and standards must be joined up and implemented fairly.
- Targeted – regulation should be focused on the problem and minimise the side effects.
5. This document sets out a framework for monitoring the compliance of those individuals and businesses undertaking letting agency work. Our objectives are to:
- support compliance with the legislative requirements in relation to letting agent work
- provide clear information to those undertaking letting agency work about
- how Scottish Ministers will assess their fit and proper status, monitor
- compliance and ensure that the requirements of the regulations are met; and
- reduce duplication and minimise unnecessary burden upon registered
- letting agents by targeting compliance activity on those assessed as being
- at greater risk of non-compliance.
6. Part 4 of the Housing (Scotland) Act 2014 ("the Act") introduced a framework for the regulation of those undertaking letting agency work in Scotland.
7. Letting agency work is defined under section 61 of the Act as:
"things done by a person in the course of that person's business in response to relevant instructions which are –
a) carried out with a view to a landlord who is a relevant person entering into, or seeking to enter into a lease or occupancy arrangement by virtue of which an unconnected person may use the landlord's house as a dwelling,
b) for the purpose of managing a house (including in particular collecting rent, inspecting the house and making arrangements for the repair, maintenance, improvement or insurance of the house) which is, or is to be, subject to a lease or arrangement mentioned in paragraph (a)."
8. Those who fall under this definition are required to apply to join the mandatory register of letting agents ("the Register") and comply with a statutory Letting Agent Code of Practice ("the Code"). To be admitted to the Register, an applicant will need to pass a fit and proper person test and meet specific training requirements set by the Scottish Ministers. An applicant can be an individual, company, partnership or a body with some other legal status.
9. Throughout this document, any reference to "person", "individual" or "business" should be interpreted as meaning any individual, company, partnership or a body with some other legal status that is undertaking letting agency work in Scotland as defined by Part 4 of the Act.
10. In order to monitor compliance with the requirements, the Act gives Scottish Ministers powers to obtain information and to carry out inspections.
11. Section 52 of the Act enables Ministers to obtain information. Scottish Ministers can require a person who appears to be a letting agent to provide specified information to allow assessment of whether a business is complying with the requirement to register and, once registered, to assess their compliance with the Code.
12. Section 53 of the Act enables a person authorised by the Scottish Ministers to inspect premises (this includes any place, vehicle, vessel or moveable structure) which appear to be being used for the purpose of carrying out letting agency work. This gives the authorised person the ability to:
- inspect any book, document, data or record and take copies of or extracts from it as well as taking possession of it for as long as is necessary; and
- require any person to give such information as is considered necessary and afford the authorised person such facilities and assistance considered necessary.
Enforcement and sanctions
13. There are a number of potential sanctions for non-compliance with the requirements in the Act. In summary these are:
i. Letting Agent Code of Practice
Where a landlord, tenant or the Scottish Ministers consider that a letting agent has failed to comply with the requirements of the Code, they can apply to the First-tier Tribunal for Scotland ("the Tribunal") for a determination on whether a letting agent has complied with the Code. An application may be made to the Tribunal only after the applicant has notified the letting agent of the failure to comply with the Code and given reasonable time for the letting agent to rectify the breach. Where the Tribunal decides a letting agent has failed to comply, it must issue a letting agent letting agent enforcement order. This order sets out the steps the letting agent must take to rectify the failure. Failure to comply with a letting agent letting agent enforcement order is a criminal offence, liable on summary conviction to a fine not exceeding level 3 on the standard scale (currently £1000). The Tribunal will inform the Scottish Ministers of a letting agent's failure to comply with an letting agent enforcement order and this may affect their status as a registered letting agent.
It is an offence under the Act for a person who is not a registered letting agent to carry out letting agency work without a reasonable excuse. This offence is liable on summary conviction to imprisonment for a term not exceeding 6 months, to a fine not exceeding £50,000 or both.
Scottish Ministers can refuse an application for registration or revoke an existing registration where a letting agent is not complying with the training requirement and/or is not a fit and proper person in accordance with the requirements of the Act.
It is also an offence to use a letting agent registration number, without reasonable excuse, where there is no registration. A person found to have committed this offence is liable, on conviction, to a fine not exceeding level 3 on the standard scale (currently £1000). In addition, where a letting agent is refused registration or removed from the Register, they will not be able to recover any costs or charges related to their letting agency work.
iii. Information and inspection
It is a criminal offence to knowingly provide false information, or to fail to supply information that is required, in an application for registration. It is also a criminal offence to obstruct a person in carrying out an inspection or fail to comply, without reasonable excuse, with any requirement made in relation to an inspection. A person found to have committed this offence is liable, on conviction, to a fine not exceeding level 3 on the standard scale (currently £1000).
iv. Duty to inform: change of circumstances
A registered letting agent is required to inform those managing the Register of a change in circumstances in relation to any of the information provided as part of the registration process. It is a criminal offence not to do so. A person found to have committed this offence is liable, on conviction, to a fine not exceeding level 3 on the standard scale (currently £1000).
14. Where there is evidence indicating that a criminal offence has been committed, cases may be referred by Police Scotland to the Crown Office and Procurator Fiscal Service (COPFS), to consider criminal proceedings.
Key people involved in monitoring compliance
15. Effective monitoring of compliance by letting agents requires collaboration between letting agents, professional and industry membership bodies, landlords and tenants who use letting agent services, housing rights organisations, voluntary redress schemes and relevant public bodies, such as local authorities, Police Scotland and the Scottish Ministers.
The Scottish Ministers are responsible for the operation of the Register and will assess the compliance of those applying to join the Register and monitor registered letting agents.
Landlords and Tenants
Landlords and tenants are in a good position to identify, and report, agents who are not complying with the requirement to register. They also play an important role through challenging non-compliance with the Code via the Tribunal. While prospective tenants and landlords cannot take a case to the Tribunal, they can provide information to help target compliance monitoring.
Public bodies are in a good position to help identify those who are not complying with the registration requirements or complying with the Code of Practice. For example, local authorities may identify non-compliance as part of their role in landlord registration, HMO licensing or as part of Trading Standards work. Police Scotland may identify non-compliance when investigating other activities.
Other interested parties
Professional and industry membership bodies, voluntary redress schemes, housing advice groups and letting agents themselves also have an important role to play in identifying those who are not complying with the Code of Practice or with the registration requirements.
16. The Scottish Ministers will support collaborative working through information sharing protocols and data sharing agreements with relevant organisations, for example Trading Standards, Local Authority Landlord Registration Teams and Police Scotland. These will set a framework for the sharing of information to ensure that information is shared, processed and used appropriately and in line with Data Protection requirements.
17. We will also work with industry membership and professional bodies to encourage letting agents and those active within the industry to share information with the Scottish Ministers to help identify those who are not complying with the
18. The type and level of monitoring undertaken by Scottish Ministers will differ
depending on whether it is in relation to assessing the compliance of a prospective letting agent as part of processing an application to be entered onto the Register, monitoring the continued compliance of a registered letting agent or dealing with an unregistered individual or business.
Applicants (including those renewing an existing registration)
19. Section 32 of the Act requires the Scottish Ministers to admit an applicant to the Register where the applicant, and other relevant persons, is a fit and proper person to carry out letting agency work and has met such training requirements as the Scottish Ministers prescribe. The following sections aim to set out:
- the key factors the Scottish Ministers will consider in determining whether a person is a fit and proper person to carry out letting agency work; and
- matters which might cause concern about a person's fit and proper status.
Fit and proper person test
20. In determining whether an applicant, and any other relevant individuals, are fit and proper persons to be admitted to the Register, the Scottish Ministers will take the following factors into account:
i. unspent convictions relating to a variety of offences i.e. fraud, dishonesty, violence, drugs, firearms, sexual offences;
ii. whether they have practiced unlawful discrimination on the grounds of any of the protected characteristics (Equality Act 2010);
iii. contraventions of any law relating to housing, landlord and tenant law or debt;
iv. the extent to which they have complied with the Code or any requirement set out in Part 4 of the Act e.g. failed to comply with a letting agent enforcement order, unlawful use of registration number etc.
21. Information provided by third parties, such as trading standards, local authorities, the Tribunal or Police Scotland, will help to inform the assessment, particularly the extent to which the person being assessed has complied with the Code and the other requirements of the Act.
22. The Scottish Ministers may also consider information which would be included within a criminal conviction certificate, where they have reasonable grounds to suspect that the information provided by an applicant about any criminal convictions is inaccurate or has become so.
23. When determining whether an individual is a fit and proper person, the Scottish Ministers will take the full circumstances of the case into account, seeking further clarification from relevant parties to an application where required.
24. Matters that may cause serious concern about an individual's fit and proper status to undertake letting agency work include, but are not limited to:
i. convictions of a serious nature or which call into question the honesty and integrity of the individual, for example violence, sexual offences, fraud, money laundering, identity theft and tax-related offences;
ii. numerous letting agent letting agent enforcement orders or letting agent enforcement orders that relate to serious breaches of the Code, for example illegal eviction or mishandling of client money;
iii. non-compliance with a letting agent letting agent enforcement order without reasonable excuse, for example failure to pay compensation or undertake the steps required by the Tribunal;
iv. multiple or serious contraventions of any housing law, for example being found to have illegally evicted a tenant;
v. failure to disclose convictions or any other relevant matters; and
vi. adverse finding, or pending disciplinary hearing or investigation, or expulsion or unfulfilled sanctions/disciplinary action by another regulator professional body or voluntary redress scheme either in Scotland or in another jurisdiction.
25. Applicants to the Register will be required to meet training requirements prescribed by the Scottish Ministers through The Letting Agent Registration (Scotland) Regulations 2016. Applicants will be asked to provide information to evidence that these requirements have been met as part of the application process.
26. In line with the principles of better regulation, the Scottish Ministers will target our monitoring and compliance activity towards those who are assessed as being at a greater risk of non-compliance.
27. To do this, the Scottish Ministers will use the information gathered during initial registration to place registered letting agents into one of three monitoring compliance categories that relate to the level of compliance activity the Scottish Ministers will undertake for their lettings business.
|Level of monitoring||Normal level of monitoring required.||Some additional monitoring required.||Enhanced level of monitoring required.|
28. In determining the level of monitoring that will be undertaken in relation to a particular agent, the Scottish Ministers will take into account the following factors:
i. information provided during the application process such as any adverse judgements, convictions or an letting agent enforcement order from the Tribunal;
ii. membership of a professional or industry body;
iii. information provided through a third party such as a local authority; and
iv. information published online and within property portals and adverts.
29. A registered agent's category can change during the registration period should the circumstances require, for example, if a letting agent letting agent enforcement order is issued or credible information is received from a third party or if they join a professional body.
30. Registered letting agents are required to have a documented complaints procedure and the Scottish Ministers will not usually take complaints against a letting agent by landlords or tenants into account if they have not first followed the agents complaints process. Consumer complaints about a letting agent's compliance with the Code should be made in the first instance to the letting agent in question, in accordance with their written complaints procedure. This will give the agent the opportunity to consider the complaint and rectify any breach. Where the complaint is not resolved through the complaints process, the landlord(s) or tenant(s) can seek a determination from the Tribunal on whether a letting agent has complied with the Code. In some circumstances, either because of the serious nature of the complaint or a significant number of complaints relating to a particular registered agent, the Scottish Ministers may investigate an issue where the agent's complaints procedure or the Tribunal process have not been completed.
31. The Scottish Ministers anticipate that most letting agents will fall within the two lower categories, with only a minority of letting agents requiring an enhanced level of monitoring.
32. Some letting agents voluntarily join a relevant membership body, for example, Association of Residential Letting Agents (ARLA) or Royal Institution of Charted Surveyors (RICS). To comply with the requirements of those organisations, members undergo annual monitoring of specific aspects of their activities including how they handle client money and an annual accounting report, demonstrating they hold client money protection and professional indemnity insurance. In recognition of this, such membership will be taken into account in setting the monitoring compliance category assigned to a letting agent. To reflect the lower risk deemed to be presented by members of these organisations and to avoid unnecessary duplication, the Scottish Ministers will consider the monitoring as part of membership as assurance that these letting businesses continue to be fit and proper persons to undertake letting agency work, unless there is evidence that suggests greater scrutiny is needed.
33. The Scottish Ministers will work with these organisations, and any other relevant bodies, to ensure any concerns they identify about one of their members can be appropriately considered and, where necessary, addressed by the Scottish Ministers.
Type of monitoring
34. There is a variety of types of monitoring that can be undertaken to assess compliance with the Code and the requirements of Part 4 of the Act. These may include:
i. reviewing published information, for example on a letting agent website or on property portals;
ii. undertaking a mystery shopping exercise;
iii. using the power to obtain information, for example by requesting specific policies and procedures; and
iv. making use of the powers of inspection through compliance visits.
35. What monitoring methods are used will depend on the level of monitoring required, whether an agent is a member of a professional or industry body that undertakes annual monitoring and whether any specific concerns have been identified or brought to the attention of Scottish Ministers. For illustrative purposes the table below sets out examples of the type of activity that may be undertaken based on the level of monitoring required for those not members of a relevant industry/membership body (see also paragraph 32 and 33).
|Level of monitoring||Normal level of monitoring required.||Some additional monitoring required.||Enhanced|
|Type of Monitoring||Random sampling of agents within this category. For example, review of published information and using the power to obtain information in relation to thematic issues identified as areas of concern e.g. complaints, repairs, handling client money.||Specific monitoring of agents within this category. For example, review of published information, tailored use of the power to obtain information (e.g. reviewing their terms of business, policies and procedures and client accounts) and mystery shopping.||Agents within this category will be subject to planned monitoring. For example tailored use of power to obtain information and compliance visits (where necessary, these may be unannounced).|
36. The person authorised by the Scottish Ministers to undertake an inspection will depend on the reason for the compliance visit. The Scottish Ministers may involve suitably qualified professionals or industry experts to undertake, or be a part of, any inspection. For example making use of a chartered accountant to inspect an agent's client accounts and accounting procedures. Depending on the circumstances, the Scottish Ministers may also seek to involve any other relevant authorities, for example Trading Standards or Police Scotland.
37. Scottish Ministers expect all letting agents be registered before they undertake any work that falls within the scope of the Act.
38. Where an unregistered business is identified, the Scottish Ministers will, where appropriate, work with other relevant authorities (for example the Local Authority and Trading Standards) to confirm whether letting agent activity is being carried out.
39. Depending on the specific circumstances, the Scottish Ministers may use their power to obtain information and of inspection to gather further information and evidence about letting agent activities.
40. Where there is evidence that an unregistered individual or business is carrying out letting agency work, the Scottish Minister's may pass this information to Police Scotland. Unregistered businesses who undertake letting agency work without reasonable excuse can be subject on conviction to a fine of up to £50,000, up to 6 months imprisonment or both.
Persons involved in ensuring compliance
41. There are a variety of people and organisations involved in ensuring letting agents meet their regulatory requirements. This includes:
i. Consumers (landlords and tenants) – Landlords and tenants can seek redress through the Tribunal where they believe a letting agent has failed to comply with the Code.
ii. The Tribunal (Housing and Property Chamber) – This tribunal is the enforcement body for the Code and the appeal body for agents refused entry to or removed from the Register.
iii. Scottish Ministers – Ministers have responsibility for administering the Register and can refuse or remove an agent who is not, or is no longer, a fit and proper person to undertake letting agency work.
iv. Police Scotland, Crown Office and Procurator Fiscal Service – Police Scotland have a role in investigating and reporting criminal offences under the Act. Where there is evidence indicating that a criminal offence has been committed cases may be referred to the Crown Office and Procurator Fiscal Service (COPFS), to consider criminal proceedings.
v. Local authorities, trading standards – While local authorities and trading standards do not have a direct role in ensuring compliance with letting agent regulation, they do have an interest through their roles in relation to landlord registration, Houses of Multiple Occupation licensing and consumer protection.
vi. Professional and membership bodies – In the same way as local authorities and trading standards have an interest in ensuring compliance with letting agent regulation, professional membership bodies and redress schemes will also have an interest in any failure to comply by their members.
42. The Scottish Ministers are committed to ensuring that all those undertaking letting agent work comply with the regulatory requirements. The action that can be taken in response to non-compliance will depend on a number of factors:
- the specific circumstances of the case;
- whether the letting agent is an applicant, a registered agent or an unregistered business;
- who the responsible body is for enforcing the particular part of the Act;
- whether the agent is a member of an accreditation body or redress scheme; and the sanctions available to the Scottish Ministers or the responsible authority (for example Police Scotland or Trading Standards).
43. The main action open to the Scottish Ministers is the refusal or removal of letting agent registration. The Scottish Ministers will take this action where the individual or business in question is found not to be, or is no longer considered to be, a fit and proper person to undertake letting agency work, having regard to all of the circumstances of the case. This will have the consequence of preventing an individual or business from legally undertaking letting agency work in the future. Continuing to do so is a criminal offence, liable on conviction of up to a £50,000 fine, up to 6 months in prison or both.
44. In determining whether to refuse or remove registration, the Scottish Ministers will have regard to all of the circumstances of the case, including the proportionality of any action to refuse or remove, based on the seriousness and extent of non-compliance.
45. It is the applicant's responsibility to provide the relevant information required to demonstrate that they are a fit and proper person, including meeting the relevant training requirements. Where the Scottish Ministers identify relevant concerns, as part of assessing an application, they will advise the applicant in order that they have an opportunity to provide the required information and resolve any issues.
46. Where the Scottish Ministers consider that an applicant does not meet the training or any other requirement of the Act and cannot be considered a fit and proper person to be admitted to the Register, they will issue a notice to the applicant. This will inform the applicant that the Scottish Ministers are considering refusing their application and the reasons for doing so. The notice will also state that the applicant has the opportunity to make written representations to the Scottish Ministers to support their case for being admitted to the Register and the timescale for doing so (at least 28 days after the date on which the notice is given). In making their final decision, the Scottish Ministers will consider the application alongside any written representations to determine whether or not to admit the applicant to the register.
47. Where the Scottish Ministers become aware that a registered letting agent is not complying with the Code, has committed an offence or contravened any housing, landlord and tenant or debt law or has acted in a way that otherwise indicates that they may no longer be a fit and proper person, they will advise the letting agent of any compliance issues and seek confirmation of what action has or will be taken to address those issues. Where appropriate, we will work with letting agents to agree a way forward, which could include agreeing an improvement plan setting out the steps the letting agent will take to address the issues identified or by setting out specific conditions that the letting agent should meet in order to demonstrate that they continue to be a fit and proper person. The timescale in which any required steps should be taken will be made clear.
48. Where a registered agent does not engage with us on any issues identified, or does not take the required steps to rectify an issue they have been advised of, the Scottish Ministers may:
i. make an application to the Tribunal in relation to non-compliance with the Code;
ii. take action to remove them from the Register;
iii. report them to Police Scotland and any other relevant authorities.
Which of these actions the Scottish Ministers take will depend on the exact circumstances of the case and the seriousness of the breach.
49. If the Tribunal has issued a letting agent letting agent enforcement order, they will notify the Scottish Ministers of any subsequent failure to comply with the order. Failure to comply with an letting agent enforcement order without reasonable excuse:
i. is a criminal offence. A letting agent who commits this offence is liable on summary conviction to a fine not exceeding level 3 on the standard scale (currently £1000);
ii. may result in Scottish Ministers taking action to revoke a registered agent's letting agent registration.
50. Where a registered letting agent's registration is revoked, and they are removed from the Register, they will not be able to seek payment for work undertaken from the date the case is finally determined and it is a criminal offence for them to continue to undertake letting agency work. If they continue to do so without reasonable excuse, they will be liable on conviction to a fine (up to £50,000), imprisonment (up to 6 months) or both.
51. Where an agent is removed from the register, the Scottish Ministers will seek to work with local authority landlord registration teams, and other relevant organisations, to inform landlords and their tenants of this fact.
Change of Circumstances
52. Registered agents are required under the Act to inform the Scottish Ministers of any change of circumstances. For example, change in a member of staff who is required to be identified in the application. Failure to do so is a criminal offence subject on conviction to a fine not exceeding level 3 on the standard scale (currently £1000). It may also affect a registered agent's letting agent registration status.
53. Where a change of circumstance impacts upon the continued fit and proper status of a registered agent, the Scottish Ministers will in the first instance work with the registered agent to rectify any concerns. This may include requiring the agent to submit an improvement plan setting out the steps they intend to take to address the problems identified or setting out specific conditions for them to meet. For example, where staff changes mean an agent no longer meets the prescribed training requirements, the Scottish Ministers may allow an agreed time period for the agent to rectify this.
54. Where the Scottish Ministers become aware they have not been informed about a change of circumstance, we will investigate this further with the agent and any other relevant parties. The action taken in response will depend on the specific circumstances of the case.
55. Where Scottish Ministers establish that an individual or a business is carrying out letting agent work without being registered, we will advise them in writing that:
- operating while unregistered and without reasonable excuse is an offence liable on summary conviction to imprisonment for a term not exceeding six months, to a fine not exceeding £50,000, or both; and
- they must cease operating until they are registered: and
- they should apply if the work they are undertaking falls within the scope of the Act.
56. Where we identify that an individual or a business appears to be carrying out letting agent work without being registered, we may use the powers to obtain information and of inspection (see paragraphs 11 and 12) to gather further information.
57. Scottish Ministers may also advise local authority landlord registration teams, and other relevant organisations, that the individual or business is not registered as a letting agent in accordance with the requirements of the Act.
58. If the individual or business continues to carry out letting agent work without being registered then we may report them to Police Scotland in connection with the commission of an offence under section 44 of the Act, which makes it an offence to operate as a letting agent without registration and without reasonable excuse. On conviction of this offence, an individual or business can be subject to a fine of up to £50,000, up to 6 months imprisonment or both.
59. Where it is established that an applicant is already carrying out letting agent work prior to making an application to be entered into the register, the presumption is that they will cease undertaking such work whilst their application is being considered and will meet all of the requirements of the fit and proper person test and all training requirements at the time of application. Carrying out letting agent work without being registered is a criminal offence and Scottish Ministers will take any period of unregistered operation and/or a failure to cease operating into account in the assessment of any application received.
Refusal or Removal of Registration
60. Where the Scottish Ministers refuse (including refusing to renew a registration) or remove a registration, that fact will be noted on the public Register for 12 months.
61. In addition, the Scottish Ministers will, as soon as is practicable after the final determination to refuse or remove a registration, publish a notice:
i. of the refusal or removal,
ii. indicating, where appropriate, that no costs or charges incurred by the person in respect of letting agency work are recoverable after the relevant date; and
iii. the relevant date.
62. This information will be shared with relevant authorities. For example, Police Scotland, local authorities, voluntary redress schemes and the Law Society of Scotland. The Scottish Ministers will seek to work with local authority landlord registration teams to inform landlords and their tenants of this fact.
63. The Scottish Ministers will, as appropriate, also circulate this information through industry membership and professional bodies and housing rights organisations.
64. Scottish Ministers will not usually consider a new application from an applicant who has been refused registration or whose registration has been removed within 12 months of their final refusal/removal unless there has been a material change in the circumstances relating to the reasons for refusal or removal. For example, a new application from a business refused/removed registration for failing to meet the qualification/training requirements for registration, will be considered where these requirements have now been met.
65. Applicants to the register and registered letting agents have a right to appeal against a decision by the Scottish Ministers to refuse or remove their registration to the Tribunal.
66. An appeal must be made, to the Tribunal, within 21 days beginning with the date the applicant or registered agent is notified of the decision.
67. In determining an appeal, the Tribunal may make an order requiring the Scottish Ministers to enter a person in the register.
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