In October, the New York City Council issued a report called Brokered Deception: The Hidden Perils of Online Real Estate Ads about their undercover investigation that discovered a third of New York City “no-fee�? apartments advertised on Craigslist.org and Backpage.com did, in fact, involve hefty brokers’ fees. And the report wasn’t the end of the matter: last week, several brokerages received subpoenas from the City’s Department of Consumer Affairs calling for the production of documents related to their online advertising.

No matter how you cut it, deceptive advertising is wrong, and the City Council and DCA are right to go after brokers who are defrauding the public. But still, doesn’t this remind you just a little of that police chief in “Casablanca�? who, in shutting down Rick’s Place, says, “I’m shocked – shocked! – to find out that there’s gambling going on here�??

Deceptive advertising, particularly on free or inexpensive websites such as Craiglist and Backpage, isn’t coming out of nowhere. Instead of simply going after the bad apples, the City Council and DCA should ask why so many of the apples are bad. They should be looking at the system that produces the bad apples.

One place they could start is with the power of the real estate industry, the industry’s relationship with the New York Division of Licensing, and the way the real estate industry has managed to exempt itself from so many inconvenient laws. For example, real estate agents are independent contractors. In any other industry, people who hold titles like vice president, who are provided with assigned desks and phone numbers in an office, who are required to attend meetings, etc. are considered employees.

Why does this matter? It matters because it allows brokers to take on any number of agents. Since the brokers aren’t saddled with obligations like paying salaries or payroll taxes, they can hire anyone and everyone who thinks that looking at other people’s apartments might be an enjoyable occupation. The results: far too many real estate agents scrambling to make a living, followed by the emergence of unscrupulous practices like the deceptive advertising that the City Council so amply documented.

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