Typically, a Fund operating agreement does not contemplate or authorize the direct hiring of employees. It can be a mistake for an entity that has investors to hire employees, as you start mixing up liabilities (investor liabilities and employee liabilities). One of our legal objectives is to isolate liabilities in each aspect of your fund, so that investors aren’t affected by tenant or employee lawsuits.
Some of our clients create a separate property management company that can hire employees. A property management company should obtain property management liability insurance that covers things like negligence, employee theft, tenant and employee lawsuits, etc. The documents we draft for our clients allow them to hire an affiliated property manager as long as the rates they charge are commensurate (or less) with fees that local property managers charge for such services.
