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Building Contracts – Watch Out For!

While this article is written for homeowners ,it has  a number of very important points that owner builders need to be aware of when dealing with tradesmen.The most important point for an owner builder is `Use contracts to protect yourself` & `sign off on variations` read on………   If you are about to enter into, or have already entered into, a building contract in relation to a residential building, there are some critical things to look out for and be aware of.

If you proceed in ignorance of these things, you risk being ‘bitten’ later on.

Assuming that the contract is over the threshold amount of $5,000 in Victoria (check your state’s local requirements relating to same) and that it is in writing, then first of all ensure all of the  inclusions and choices and fittings are agreed on and included in the contract. It is not good enough if such items are included later. The contract should also include details as to who is to be responsible for supply of items such as ovens, tapware and tiles, for example.

The relevant legislation has certain requirements for such contracts, but it is important to watch out for certain things and bear them in mind until the project is completed.

Delays are always possible and the commencement and completion dates (and how the commencement date is calculated) should always be agreed upon and noted. Note the number of days allowed for delays, which should be reasonable.

Check that the builder’s registration details are current and that there are no restrictions or limitations which can become relevant. For example, there have been cases where a builder has had limits on their licenses stating that they couldn’t construct a building over one storey in height, yet they enter into contracts to construct taller residential dwellings. Entering into a contract with such a builder is clearly a mistake. Of course, check more generally as to whether the builder is the right person for this particular job.

It should be clearly agreed and understood who is responsible for obtaining and paying for planning and building permits.

Special conditions, which generally prevail over general conditions, at least where the relevant clauses are inconsistent, should be checked as in these cases, the devil can be in the details.

It is critical for both the builder and the owner that domestic building warranty insurance is in place and referred to accurately in the contract.

The methodology of progress payments and how, when and how much can be validly claimed at any particular time is absolutely crucial to be set out correctly. The defects liability period (or maintenance periods) should be checked and understood. Perhaps the most common periods of time applicable are three- or six-month periods.

Variations are critical to deal with correctly. Many builders and/or owners forget or or just do not know that  generally the proper process is to have an initial discussion as to something ‘extra’ to the contract or to the project where that initial discussion then morphs into a verbal agreement. Then that verbal agreement becomes a quotation where the specific details of the change are documented. The quotation then becomes an invoice which is signed and which is carefully read for accuracy (and of course paid) and the extra works and or products and or services are delivered or provided. This is the ideal, anyway. Any new completion as a result thereof should be documented too.

Prime cost items are selections of fixtures and fittings that are listed items in the contract but which are not specifically identified and costed. This is typically because the owner and the builder could not determine or agree on the make, model or exact price of the item at the time of the signing of the contract – the price could only be estimated, and which could be less than the final cost.

Where possible, you should avoid prime cost items. Try to include the specific details of selections (such as make, model, colour and style) in the contract, so that the building cost is final. Much angst can thereby be avoided later.

And then there are provisional sum items – items listed in the contract for possible additional work, such as excavation, where the builder cannot give an exact price of the work at the time of the signing of the contract, and can only make a reasonable estimate of the cost.

Where possible, owners are advised to not agree on provisional sum items as they can make the  final total cost higher.

Seek legal advice if you are asked to enter into, or are considering offering or entering a cost-plus contract (where the builder charges by the hour and you do not have a fixed price). Cost-plus contracts are only allowed for renovation projects worth over $1 million, and then only in very limited circumstances.

Documentation is king, and that applies for both owners and builders and it helps to make the project smoother but of course, assists potentially as well, both parties in the event of a dispute down the track.

In  cases where any or all of the above issues are causing concern of any kind, it is best to seek the advice of a professional advisor to help you navigate what can become a minefield.

Brandon Vigon

Owner builders ,it is not all plain sailing when renovating!

HOME renovators and tradies are unknowingly putting themselves at risk of lung cancer by failing to protect against silica dust on the job site, the Cancer Council says.

New estimates from the cancer charity suggest more than 230 cases of lung cancer each year are caused by exposure to silica dust, prompting warnings for tradespeople and DIY home renovators to protect themselves from the invisible cancer risk.

Cancer Council Australia occupation and environmental cancer risk committee chairman Terry Slevin said tradespeople who had daily exposure to the super fine dust were the most at risk, but home renovators should also beware.

“We estimate, based on a study published in 2011, that about 600,000 Australian workers are exposed to silica dust and there are methods of mitigating that exposure,” he said.

“There is people in the mining game, the construction game, the renovation game, road building and construction, sandblasting, there is a large number of jobs where people are likely to be exposed to silica.”

Silica is found in stone, rock, sand, gravel, clay, bricks, tiles, concrete and some plastics.

The dust, which Mr Slevin said was 100 times smaller than a grain of sand, was released when these materials were cut.

Mr Slevin said survival outcomes for lung cancer tended to be poor and warned tradespeople to protect themselves using personal respiratory devices, dust prevention measures and proper ventilation.

Eve Renovations owner Laura Madden has worked in the building industry for the past 15 years and said the dangers of silica was part of her early training.

 

Ms Madden said she tried to avoid mechanical cutting of materials containing silica where possible.

“That reduces a lot of that dust, but if we do ever have to use mechanical cutting, grinders or things like that, at all times we have to wear a dust mask and to do it in a well-ventilated area and make sure we’re wearing the correct PPE (personal protective equipment).”

News.com.au – Originally published as The invisible killer threatening tradies

What is Underinsurance and how could it effect you as an Owner Builder?

Owner Building is a fabulous way to improve family finances, by investing in your home without paying the 30+% Builders margin, it will set you up for future financial independence.

This is not to say building your own home is easy, but depending on how you go about it, if you have experience or you use a project manager will depend together with your purchasing ability, on the amount of money it costs you.

But even if you save as little as 10% on what a builder would cost, e.g. $400,000 builder cost, thats $40,000 is your equity, which will grow over time.

Now would you like to put this at risk? By under insuring your home while building?

Owner Builders want to save money BUT do not do so by underinsuring the value of your home!

N.B Insurers, in the event of a claim, base the estimate of the damage on what a builders price of the job would have been, NOT what you and your friends built it for!

So when you enquire regarding the price of Owner Builder Construction and Public Liability Insurance, work on what a builder would have built your home for.

This is even more important when renovating and including the cost of the existing home in the policy (existing home and renovation).

If you underinsure, this is what will happen if you have a claim, based on a $400,000 build.

If your sum insured is only 50% of the value of the property required to be insured at the time that the insured damage occurs, the insurer will only cover a proportional amount of your loss, as set out below: Full Insurable value $400,000 Sum insured $200,000 (I.e. 50% of the full insurable value)

Amount of your loss $200,000 Amount the insurer will pay $100,000 (i.e. 50% of the loss) less any Excess.

This means you will be responsible for 50% of the loss you suffer (as well as any applicable excess) because your sum insured was only 50% of the value of your property required to be insured.

So what would I do? Either have your plans quantity estimated or get quotes from Registered Builders to do the job.

This way you have a position if in the event of a fire or storm you have the quote or estimate with which to approach the insurer. The last thing you need is to suffer a major financial loss and because of underinsurance, unable to rebuild your home yet having to pay the bank for the original loan.

Do your homework before signing a building contract

Owner builders do your homework before signing a building contract with your subbies,this recommendation is for all owner builders & homeowners as well.   NSW Fair Trading is urging consumers to do their homework before signing a residential home-building contract, following complaints about builders demanding thousands of dollars in unexpected additional payments.   “We are hearing from consumers who thought they had entered into a ‘fixed price’ contract with a builder, only to find this wasn’t the case, and this scenario is causing them extreme emotional and financial stress,” NSW Fair Trading Commission Rod Stowe said.   “Some builders are applying penalty costs for delayed commencement of construction work, even if the delays were outside the consumer’s control. They are also demanding payment for things thought to be covered by the contract, such as site clearance, structural steel beams, and council fees and charges.”   Fair Trading has also received complaints from consumers who were expecting a specific final-payment amount, only to find it was higher than expected, and sometimes a substantial proportion of the total contract price.   “Furthermore, if the consumer does not pay the increased final payment the builder refuses to hand over the keys, essentially holding the customer to ransom,” Mr Stowe said.   “In some instances, a builder will offer the consumer a reduction in the final payment if they agree to sign a deed of release, preventing them from making adverse comments and indemnifying the builder from any further claims.”   Consumers have also complained about having to pay a non-refundable fee of up to $15,000 to enter into a pre-tender agreement with a builder.   “Before signing anything, consumers should seek independent legal advice to ensure they fully understand the terms of a pre-tender agreement, and any special conditions attached to their building contract, and how these factors could affect their final payment,” Mr Stowe said. “This may cost you more up front, but it could save you tens of thousands of dollars in the long run, and protect your biggest financial investment.”   NSW Fair Trading recommends the use of its plain English home building contracts, which can be downloaded for free from the Fair Trading web site: fairtrading.nsw.gov.au.

Infinity Cables – ‘Ticking time bomb’ remains for thousands of homeowners

As homeowners renovate around 7 years,or you have bought a house that was renovated 6/7 years ago ,you need to read this article especially if you are an owner builder.

Article on Insurance Business Magazine by Jordan Lynn

The Australian Competition & Consumer Commission (ACCC) has warned that thousands of homeowners across the country could still be at risk of fire and electrocution due to faulty electric cables.

Infinity cables installed in New South Wales homes in 2010 may already have started cracking, with other state and territories where the cable was installed from 2011 coming into danger next year.

The product safety regulator is warning that the dangerous cable could become prematurely brittle and break under stress near heat sources and roof access areas. This could lead to fire or electric shock if cables are disturbed by home or business owners or tradespeople.

Delia Rickard, ACCC deputy chair, said that whilst the product recall is in its fourth year, only 54% of the 4,313km of dangerous cable has been found and fixed.
“Your home might be a ticking time-bomb if you haven’t had Infinity cabling replaced,” Rickard said.

Rickard urged those who had electrical cables installed between 2010 and 2013 to organise an inspection with a licensed electrician.

Brokers should discuss with both home and business clients if their properties have undergone any electrical work during this timeframe.

“In some circumstances, suppliers, installers and property owners may be liable to pay compensation for injury or property damage caused by Infinity cable installed in buildings,” Rickard continued.

The national recall began in August 2013.

Employees, subcontractors and contractors – a detailed examination of liability and apportionment principles

Wake up call to all builders and owner builders, in the event of an accident onsite and how the court apportioned the percentage of liability. Please read.   Article by Vidal Hockless and Sophie NauwelaersKott Gunning   CASE SUMMARY: COOTE V TERRY’S CRANE HIRE & CGU INSURANCE & DEBRI PTY LTD   This decision of Bowden DCJ, although at first instance, is instructive as to the application of legal principles typically arising in multi-party workplace injury disputes and the apportionment between contracting parties.   The plaintiff, Benjamin Coote, was very seriously injured when on 20 September 2010, whilst working as a dogman and standing on a roof, he tripped or stepped through a skylight and fell about 3m to the concrete floor below.   Mr Coote had been engaged by Terry’s Crane Hire (TCH) to work as a dogman assisting roofing contractor. TCH had been engaged by the roofing contractor, Mallon Co Pty Ltd, t/asFrontline, which company also engaged Debri Pty Ltd as a roofing subcontractor on the site.   Mr Coote had been warned about the presence of the skylight and told to avoid walking near it as it clearly constituted a danger. It appears that in the circumstances of the accident, Mr Coote actually tripped on or near the load that was about to be removed by crane and fell headfirst through the skylight.   TCH, by which Mr Coote had been engaged to work as a dogman, admitted liability for negligence, compromised by a deduction of 15% for Coote’s contributory negligence. The action, however, continued as between the defendants for the purpose of ascertaining apportionment.   TCH sought contribution from CGU Insurance, as the insurer of Frontline, which had been deregistered pursuant to Section 509 of the Corporations Act 2001. The action against CGU was brought pursuant to Section 601KG of the Corporations Act.   In order to dispose of the case, Bowden DCJ had to consider a range of legal issues, as well as to make the necessary findings of fact to apply to the determination of those issues. The legal issues included:
  • Did Frontline owe a duty of care to Mr Coote?
  • Did Frontline breach a common law or statutory duty of care?
  • Was Frontline aware of the danger?
  • Did Frontline know or ought they to have known of the danger to Mr Coote?
His Honour found that as principal contractor, Frontline was aware of the circumstances surrounding the injury to Mr Coote and of the danger to which he was exposed. His Honour found that there was a failure to take reasonable care by Frontline in not retaining a supervisory power which would have resulted in steps being taken to better assure the safety of workers such as Mr Coote, who might be working on the roof. Amongst other things, that duty would have extended to ensuring that the skylights were made safe.   The danger was found to be an obvious one but also the risk was very clearly of serious harm being caused. His Honour had no difficulty in also reaching the conclusion that Frontline’s breach of duty was a contributing cause to Mr Coote’s injuries.   His Honour found that Frontline had also breached the duties it owed pursuant to the provisions of the Civil Liability Act, as well as the Occupier’s Liability Act. He also considered the significance of Frontline’s conviction for an offence under the Occupational Safety and Health Act. This, he regarded as relevant and of some weight in determining the issue of liability, but not determinative. In the circumstances, he concluded that it was the evidence at trial and not the conviction that satisfied him in regard to the elements of Frontline’s liability.   He further considered the question of whether a breach of statutory duty (regulation) gave rise to a further course of action in relation to which a finding should be made against Frontline. It was his opinion that such a breach may create a private right of action and found an action for damages, but that on the basis of his conclusions with respect to the liability of Frontline under the Civil Liability Act and the Occupier’s Liability Act, it was unnecessary for him to determine the issue. He noted that if he was wrong in his conclusions with respect to liability under the former legislation, it would mean that Frontline could not have had “control at the site” or “control of the workplace” and could not therefore be in breach of statutory duty. He did not, however, believe it necessary to consider the issue further.   The question of whether Mr Coote was an employee or a subcontractor was also raised for determination. On the face of it, a finding that Mr Coote was an employee was likely to impose a higher duty of care on TCH than if he was found to be an independent contractor.   His Honour reviewed the various indicia of an employment relationship by reference to the facts in this case and found several that applied equally to employment as to an independent contract, several were more consistent with an independent contracting arrangement but several were also more consistent with an employment relationship.   His Honour found that although in having an ABN and submitting invoices for his work, Mr Coote appeared to view himself as an independent contractor, in substance, his role was more that of an employee and he so found.   In considering the issue of apportionment as between TCH and CGU (on behalf of Frontline), His Honour noted that the primary obligation for the safety of the employee rested with the employer, TCH. Nevertheless, the contribution of Frontline was a substantial one for all of the reasons previously canvassed and, in the circumstances, his apportionment of liability was 40% to Frontline and 60% to TCH. His Honour also observed that if he was wrong in his conclusion that Mr Coote should be regarded as an employee, and “notwithstanding that an employer’s duty to an employee in law is greater than a contract’s duty to another contractor, factually in the circumstances of this case, it makes no real difference as TCH’s breach of duty is, in my view, greater than Frontlines”. Accordingly, he maintained the apportionment of 40% to Frontline and 60% to TCH.   On one view the substantial apportionment against a contracting party that had sub-contracted the physical work and was not directly involved in the work on site, as compared to an employer actively engaged on site may seem high. The reasoning, however is well explained and the conclusions certainly open on the evidence. The conclusion does place emphasis on the duty of care, both statutory and at common law, of a higher tier party for which the safety issue in question should be within its nature field of concern and responsibility – regardless of the interposition of other responsible contracting parties including an employer.   The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Separating Walls on Boundaries – a gap with fire safety implications

Owner builders need to be aware of these requirements when building,your building services professionals should be aware of the following eg Building Surveyor,architect or draftsman.

Please read.

VBA Thursday March 30 2017 

The VBA Pro-Active Inspection Program has identified many garage brick walls on boundaries being bricked only as high as the course below the lower end of the pitched gutters, and in some cases only as high as the top plate.
 
This practice saves a number of courses of brickwork and avoids the task of splitting bricks.  The gap that extends up to the underside of the gutter is being clad with a metal sheet Colorbond flashing, with the structural framework immediately behind, including wall and roof framing members.  
 
The VBA reminds practitioners that Colorbond flashing is not a fire-rated material and does not provide fire separation in its own right.
 
What should be done?
 
The Building Code of Australia – NCC Series, Vol. 2, sets out the Performance Requirements relating to protection from the spread of fire. Key information on this issue can be found in Part 2.3.1 – Fire Safety: Protection from the spread of fire and Part 3.7.1 – Fire Separation, including Part 3.7.1.3 External walls of Class 1 buildings and Clause 3.7.1.8 Separating walls.
 
BCA Deemed-to-Satisfy (DTS) provisions for External Walls on Boundaries includes four diagrams indicating acceptable construction methods (Figure 3.7.1.3). It is important to note that figure 3.7.1.3 (c) does not permit a gap to be provided between the underside of the gutter, the flashing or brickwork.
 
Figures 3.7.1.11 provide acceptable construction practices for separating walls between dwellings.
 
Performance Solutions may be proposed that meet Performance Requirement P2.3.1.  However these must be designed by a suitably qualified person and be reviewed and approved by the Relevant Building Surveyor (RBS) to verify compliance with BCA Clause 1.0.5 (Clause A0.5 of Volume 1).  This is to occur prior to construction.
 
For Class 2 to 9 buildings (BCA Volume 1), the Performance Requirements are contained in Clauses CP2 & CP8.   Compliance with BCA Volume 1, Clause A0.5 is to be verified by the RBS prior to construction.  DTS Clause C2.7 specifies that a fire wall is to be carried through to the underside of the roof covering.  Concessions exist to permit certain elements to cross or pass through a fire wall.
 
What can you, as a practitioner do?
 
Building practitioners should speak with the RBS prior to carrying out any building work that falls outside the BCA DTS Provisions and Australian Standards. 
 
Building Inspectors are advised to report to the RBS any Performance Solutions used in construction that are not part of the approved documentation, or do not comply with the BCA DTS Provisions and Australian Standards. 
Remember: it is not the role of the building inspector during the inspection process to approve Performance Solutions that have not been considered and approved by the RBS.
 
Examples of non-compliant building work:

 

 

Example of a typical domestic garage wall on the title boundary with a non-compliant fire-resisting wall. Excessive metal flashing between the top of the brick wall and the underside of the gutter can be seen.

Example of a typical domestic wall on the title boundary with the timber framing behind the gutter and metal flashing; without the required fire-resisting protection in place. (Note: approximately 3 brick courses are missing and the metal flashing should also continue and be located directly under the roof covering – refer Figure 3.7.1.3(c) of the BCA).

Example of a completed domestic project where the top 340mm of the

What if something goes wrong?

Try and control discussions by asking appropriate questions rather than dictating your terms…keep a log of any discussions…

Keep the lines of communication open

  • Most disputes are complicated by a communication breakdown. No matter how bad things get you should endeavour to keep the discussion constructive
  • Do not blame the builder’s staff directly. You do not want them to see themselves as the problem – even if they are. You want the builder to focus on the possible solutions to a building problem not defend themselves personally
  • Do not allow personality conflicts to arise if at all possible. Take time to cool down and phone back later. It may be the builder’s fault but pointing that out will not help getting it fixed
  • Try and control discussions by asking appropriate questions rather than dictating your terms.
  • Remember that the builder or his staff also have bad days. Friday afternoons and Monday mornings are not good times to raise problems unless they are critical. Do you really have to discuss it today or can a written note serve the same purpose? It is easier to follow-up a previous note than try and explain things afresh when the hearer doesn’t really want to hear it. The last phone call the builder had may have been from a client berating them or to a supplier or tradesman letting them down
  • Document all discussions in a construction diary. All contract documents should be kept handy in a construction file. Add copies of all correspondence, variations and colour schedules in one place. Written confirmation to the builder of any instructions on concerns will greatly assist in future disputes. Keep a log of any discussions including date and person you spoke to and a brief summary of the discussion including specific things agreed. This will keep your attention focused in future follow up and will assist greatly in future legal representations if needed
  • Confirm all requests in writing. The building contracts is a written document and any matters that relate to the contract should also be in writing. The contract sets out specific time frames for certain notices and instructions to be provided. You should read the contract first before taking any action. It is always easier to refer to past correspondence than past discussions as there is less scope of ambiguity. Subsequent insurance claims or tribunal hearings demand written communication to have taken place.
  • Stay objective. Principals can be expensive to win and will complicate the dispute process. Always remember that you only have one real objective – to get the home you have paid for finished on time
  • Don’t try to win on other issues ahead of this objective
  • When an issue is likely to delay the building and not add to the finished quality – maybe you should drop it before it gets out of hand and affects the major objective
  • Always remember that houses are “hand made”. Blemishes and imperfections are almost unavoidable. Ask yourself “Will this item affect my enjoyment and the future value of the home?”

Owner Builders Be Aware – Defective Building Materials on the Market!

The fallout from using defective building materials, as explained in the following article, by Owner Builders can be severe.

Not only the problem living in the home, but the legal implications when selling/sold the home.

Under the Building Act, you, the Owner Builder warrant that the building materials are good and suitable for purpose – if they are not then you are responsible to rectify as the warranty insurance will be voided. 

Article on Gen Re 

The increasing prevalence of leaky, toxic and downright dangerous buildings has put defective building products in the spotlight in Australia and New Zealand recently.

Below-standard plasterboard, inflammable exterior cladding material, and problems with structural steel prone to failure are all creating liability concerns across the region.

In Australia’s regions of warmer and more humid climates, especially in the tropics, the constant damp created by humidity creates fertile ground for mold to grow. Many mining communities are struggling with mold infestations in their homes.

The problem can also occur in cooler climates, such as in Tasmania, where wet weather is common. The Tasmanian state government identified its own leaky building syndrome in 2014, while the state of Victoria also established a task force to monitor similar issues.

Meanwhile the Australian Building Codes Board modified the compliance path for weather tightness performance requirements, which is included in the National Construction Code 2016.

In New Zealand’s construction sector of insurance, there is outcry because of the condition of many buildings built between 1994 and 2004. During that period, new construction materials and methods, which seemed more modern or efficient at the time, were allowed. Timber-framed buildings are especially problematic but many buildings have defective exterior cladding systems as well.

The repair bill is currently estimated at around $NZ 11 billion.

In Australia defective plasterboard imported from China has caused particularly strong controversy. The low grade fly ash waste used in the plaster composition has already created a multi-billion dollar liability issue in the U.S.

The plasterboard allegedly emits several gases, including carbon disulfide, carbonyl sulfide and hydrogen sulfide. It causes metal to corrode, electrical equipment to break down, and galvanized nails and truss supports to rust out.

To make matters worse, no easy remedy seems available to homeowners or contractors as a complete re-build of the affected building’s interior is often required.

Asbestos in building products imported from China is another serious worry. Headline examples from 2016 include roof panels at Perth’s children’s hospital1 and fiber cement sheeting used in construction in at least 64 construction sites.2 Fires related to exterior cladding on high-rise buildings also continue to cause alarm. Since the November 2014 devastating blaze at the Lacrosse apartments in Melbourne’s Docklands, similar fires have broken out in other Asia-Pacific cities with modern high-rise apartments, most recently in Dubai.

It’s worrying that fireproof exterior cladding imported from China often fails to meet specifications. Audits by the Victorian Building Authority (VBA) highlight the huge scale of the problem: out of 170 new high-rise buildings inspected in Victoria, 51% failed to meet specification. The VBA has since ordered the builders and owners of the Lacrosse apartments to remove the cladding, which will cost millions of dollars. Outside the state of Victoria, it is highly likely a similar incidence of defective imported fireproof cladding exists throughout Australia and in New Zealand.

Plasterboard, asbestos and cladding are not the only imported building materials causing concern. Questions loom over the quality of the steel being imported by Australia and New Zealand from Asia. Sub-standard steel used in infrastructure projects is too weak or too brittle and has proved to be prone to failure. In New Zealand, steel intended for a NZ$ 450 million road bypass scheme failed strength tests. In Western Australia steel intended for a major bridge construction scheme failed safety tests.

New Zealand, even more so than Australia, may have some very serious problems with defective structural steel in the future due to the ever-present earthquake exposure.

Changes to the Victorian Building Act!

An owner-builder is someone who takes responsibility for domestic building work carried out on their land and is legally responsible for the project from start to finish. An owner-builder assumes the responsibilities, risks and liabilities of a builder. Some of these responsibilities last for six and a half years after completion of the building work.

You are not an owner-builder if you are engaging one building practitioner to do all the building work.

Some builders or tradespeople may ask you to sign a building permit application as an owner-builder even though they will be doing the work. If you do this it may put you at risk. The person may be unregistered or trying to avoid their legal responsibilities.

To read more please visit the Victorian Building Authority website CLICK HERE

 
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