Most LPs sign the subscription agreement without negotiating because they assume the document is take it or leave it. Sometimes it is. Often it is not.

Here are the rights you should at least ask about before any wire goes out.

Information Rights

Quarterly financial statements at minimum. Monthly preferred. Annual tax K-1 by March 15.

Right to review property level financials, not just fund level summaries. Right to ask reasonable questions and get answers within a defined timeframe, usually 10 business days.

If a sponsor pushes back on information rights, that tells you what their reporting culture is. Walk.

Capital Call Protections

Most deals have a provision allowing the GP to call additional capital from LPs if needed. The terms matter.

Negotiate a cap on additional capital calls. Most reasonable structures cap LP exposure at 20 to 25 percent of original investment for additional contributions.

Negotiate the consequences of not contributing. Some deals dilute non-participating LPs harshly, sometimes punitively. Others use a more reasonable pro rata dilution. Read the language carefully.

Major Decision Approvals

Certain decisions should require LP majority or supermajority vote. Selling the property before the projected hold. Refinancing into materially different debt structure. Changing the GP or material changes to GP control. Material modifications to the business plan.

Most operating agreements have some version of these protections. The details vary. Demand that the major decisions list be specific and meaningful, not just a list of things that would never happen anyway.

Removal Rights

The GP can be removed in extreme circumstances. Most agreements require a supermajority of LP interests, typically 75 percent or more, plus a defined cause.

Cause usually includes fraud, gross negligence, material breach of the operating agreement, or felony conviction. It rarely includes underperformance, which is appropriate. You cannot remove the GP for missing pro forma. You can remove them for stealing or lying.

Removal rights are rarely exercised. But they should exist. They are the LP's nuclear option.

Buy-Sell and Right of First Refusal

If the GP wants to sell their interest, LPs should have a right of first refusal at the offered price. If the LP wants to exit early, the operating agreement should describe a process, even if liquidity is limited.

These provisions are not always negotiable in smaller deals. But ask. The answers tell you what the sponsor expects to happen over the life of the deal.

Tax Distribution Provisions

Some deals have phantom income, where LPs are allocated K-1 income that does not match cash distributions. This is more common in deals with significant depreciation recapture or 1031 exchanges.

A good operating agreement includes a tax distribution provision. The GP is required to distribute enough cash to cover LP tax liability, regardless of other distribution priorities.

If you are in a high tax bracket, ask about this provision. It can make a meaningful difference in your actual after-tax cash flow.

Side Letters and the Reality

For checks above 500 thousand to 1 million dollars, you can sometimes negotiate a side letter that gives you bespoke rights. Co-investment rights on the next deal. Lower management fees. Custom reporting cadence. Most favored nation clauses.

For smaller checks, you generally accept the standard agreement. But you should still read every provision and ask about the ones that matter to you. The conversation itself often surfaces what kind of sponsor you are dealing with.

LP Rights You Should Demand Before Writing a Check