TMI in commercial real estate stands for Taxes, Maintenance, and Insurance — the recurring "additional rent" that tenants pay on top of base rent. In Ontario, almost every commercial lease is structured as net (the tenant pays TMI) or triple-net (the tenant pays TMI plus utilities and structural items). Understanding TMI is essential for tenants pricing a lease and for buyers underwriting an investment property.
In this guide, we cross-reference Buying Commercial Real Estate, What Does BAC Mean?, and What Are ELFs? — click through whenever you want to go deeper on a related concept.
What Each Letter Covers
- T (Taxes) — the property's share of municipal property taxes.
- M (Maintenance) — common-area maintenance, repairs, snow removal, landscaping, security, management fees.
- I (Insurance) — landlord's property insurance for the building (not the tenant's contents).
How TMI Is Quoted
Toronto commercial leases typically quote TMI as a $/sq ft annual rate. For example, base rent of $25/sq ft + TMI of $15/sq ft = total occupancy cost of $40/sq ft. On a 1,500 sq ft Scarborough retail unit, that's $60,000/year.
Net vs Gross Leases
| Lease Type | Tenant Pays |
|---|---|
| Gross | Base rent only — landlord covers TMI. |
| Net | Base rent + TMI. |
| Triple Net (NNN) | Base rent + TMI + utilities + tenant maintenance + sometimes structural. |
| Modified Gross | Hybrid — landlord pays some operating costs, tenant pays others. |
How to Calculate TMI
Landlords typically estimate TMI annually based on the prior year's actual costs. The estimate is billed monthly and reconciled at year-end. Sample formula: total annual building operating costs ÷ rentable square footage = $/sq ft TMI.
TMI Audits
Sophisticated tenants negotiate the right to audit landlord operating expenses. Common challenges: management fee inflation, capital items disguised as maintenance, and personal expenses charged to the building.
TMI for Investors Underwriting Properties
When buying a commercial investment, never trust the marketing pro-forma TMI. Pull two years of actual operating statements. Verify property tax (MPAC), insurance (broker quote), and maintenance contracts. Misrepresented TMI can blow your cap rate by 50–100 bps.
Frequently Asked Questions
Is TMI charged on residential leases?+
Not directly. Residential rents in Ontario under the RTA are quoted gross — the landlord pays property taxes and insurance, and most maintenance. The concept is commercial-only.
Who calculates TMI?+
The landlord (or property manager) estimates annual TMI based on the prior year and bills the tenant monthly. A reconciliation is done at year-end.
Can TMI go up during my lease?+
Yes. TMI fluctuates with property tax assessments, insurance premiums, and operating costs. Most leases pass these increases through to the tenant. Negotiate caps if you can.
Should I include TMI in my budget?+
Always. Total occupancy cost = base rent + TMI + utilities (in NNN leases). For Toronto retail, total often runs 40–80% above the headline base rent.
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Work With a Top Toronto Real Estate Agent
Looking at a Toronto commercial lease or investment property? Aldo's team handles commercial transactions across the GTA — including TMI underwriting and lease review.