When you upload files to a team or an Office 365 Group, it is important to remember that all members of this team/group will have equal access rights (i.e. read and write) to all files stored in all folders. The best practice for limiting access to files in a team is to create a private channel. Each private channel is associated with its own Sharepoint site which is separate from the main team's Sharepoint site. Access to files in a private channel can be limited to a subset of members of the main team.
It is possible, however, to edit default permissions of individual folders or even individual files, so that only a subset of group’s members will have access to the files, or to remove write access and only give members read access. Only group's owner has the ability to modify default access permissions on individual folders and files, and these changes can only be implemented in Sharepoint interface.
To change permissions on a sub-folder:
- Right click on a sub-folder and select Details
- Click on Manage access
- Click on Advanced
NOTE: If you do not see Advance option, it means that you are not listed as a Owner of this group.
- Click on Stop inheriting permissions button on the ribbon
- Make appropriate changes
If you need additional assistance with setting up custom folder/file permissions inside your Office 365 Group, please open a ticket.