How to Calculate TMI in Commercial Real Estate
TMI (Taxes, Maintenance, and Insurance) is one of the most important costs to understand when leasing commercial space. This guide walks you through the formulas, shows you real-world examples, and helps you budget accurately for your total occupancy cost.
The TMI Formula
Calculating your TMI share involves three steps. Here is the core formula:
Calculate Total Building Operating Costs
Total TMI = Property Taxes + Maintenance (CAM) + Insurance
The landlord calculates all operating expenses for the entire building or property, including municipal property taxes, common area maintenance costs, and building insurance premiums. Some leases also include management fees in this total.
Determine Your Proportionate Share
Proportionate Share (%) = Your Leased Area / Total Leasable Area x 100
Your share of TMI is based on how much of the building you occupy relative to the total leasable area. For example, if you lease 2,000 sq ft in a 10,000 sq ft building, your proportionate share is 20%.
Calculate Your Annual TMI
Your Annual TMI = Total Building TMI x Your Proportionate Share (%)
Multiply the total building operating costs by your proportionate share percentage to arrive at your annual TMI obligation. Divide by 12 for your monthly TMI payment, which is added to your base rent.
Worked Example: Retail Unit
Let's walk through a complete TMI calculation for a retail tenant in a small commercial plaza:
Building Details
Annual Building Operating Costs
Your TMI Calculation
Calculating Your Total Occupancy Cost
Your total monthly cost is your base rent plus TMI. Here is how the full picture looks using the retail example above:
Based on 1,500 sq ft at $20/sq ft net rent plus $10.67/sq ft TMI. HST applies on commercial rent and TMI. Actual costs will vary.
What Each TMI Component Includes
Understanding what falls under each category helps you evaluate whether your TMI charges are reasonable:
T — Taxes
The property tax component covers municipal property taxes assessed by the local government. This is typically the largest single component of TMI.
- Municipal property taxes based on assessed value
- Education tax levy
- Business Improvement Area (BIA) levies if applicable
- Reassessed periodically by MPAC (Municipal Property Assessment Corporation)
M — Maintenance (CAM)
Common Area Maintenance covers all costs to operate and maintain the shared areas of the building and property.
- Cleaning and janitorial services
- Landscaping and snow removal
- Parking lot maintenance and lighting
- HVAC system servicing
- Elevator maintenance
- General building repairs
- Waste removal and recycling
- Security and fire safety
I — Insurance
The insurance component covers the landlord's building insurance policies. This is separate from any tenant insurance you may need.
- Building structure insurance (fire, flood, damage)
- Landlord's liability insurance
- Boiler and machinery insurance
- Does NOT cover tenant's inventory, equipment, or liability
Typical TMI Ranges by Property Type
TMI rates vary significantly depending on the type of commercial property. Here are typical ranges for the GTA market:
Ranges are approximate for the Greater Toronto Area as of 2026. Actual TMI depends on the specific building, location, age, and landlord's operating efficiency.
Tips for Managing TMI Costs
Before Signing a Lease
- Request 3 years of historical TMI statements
- Check for TMI escalation caps in the lease
- Verify how proportionate share is calculated
- Confirm which costs are included vs excluded
- Negotiate an audit clause for transparency
During Your Lease
- Review annual TMI reconciliation statements
- Compare TMI year-over-year for unusual increases
- Challenge property tax assessments if they seem high
- Budget for annual TMI increases (typically 3-5%)
- Exercise your audit rights if costs seem unreasonable
Watch Out For
Some landlords include capital expenditures (roof replacement, major renovations) in TMI, which can cause dramatic year-over-year increases. Your lease should clearly define what qualifies as an operating cost vs. a capital expense. Capital items should be amortised over their useful life rather than charged entirely in one year. Always have a commercial real estate lawyer review your lease before signing.
Frequently Asked Questions
What is TMI in a commercial lease?
TMI stands for Taxes, Maintenance, and Insurance — the three categories of operating costs that commercial tenants pay on top of their base (net) rent. TMI is also called "additional rent" or "operating costs" and covers property taxes, common area maintenance (CAM), building insurance, and sometimes management fees. In a net lease, the tenant pays TMI proportional to the space they occupy.
How do you calculate TMI per square foot?
To calculate TMI per square foot, divide the total building operating costs by the total leasable square footage. For example, if a building's total annual operating costs (taxes + maintenance + insurance) are $150,000 and the total leasable area is 10,000 square feet, the TMI per square foot is $150,000 / 10,000 = $15.00 per square foot per year. Your share as a tenant is then calculated by multiplying this rate by the number of square feet you lease.
What is included in the 'maintenance' part of TMI?
The maintenance component of TMI — often called Common Area Maintenance (CAM) — typically includes cleaning and janitorial services, landscaping and snow removal, parking lot maintenance, elevator maintenance and repair, HVAC system servicing, lighting for common areas, general building repairs, waste removal, and security. Some leases also include property management fees (typically 3-5% of gross rent) within the maintenance component.
Can TMI increase during my lease term?
Yes. TMI is typically adjusted annually based on actual operating costs. Property taxes can increase due to reassessment, maintenance costs rise with inflation, and insurance premiums fluctuate. Most commercial leases include provisions for annual TMI adjustments. Some leases cap TMI increases (e.g., 5% per year), while others pass through actual costs without a cap. Always review the escalation clause in your lease to understand your exposure to rising TMI costs.
What is the difference between gross rent and net rent plus TMI?
In a gross lease, the landlord quotes a single all-inclusive rental rate that covers base rent and all operating costs — the tenant pays one amount and the landlord handles all expenses. In a net lease, the tenant pays a lower base rent plus their proportionate share of TMI separately. The net lease gives tenants more transparency into actual costs but also means costs can fluctuate. Most commercial leases in Ontario are net leases where TMI is paid as additional rent.
How can I verify that my TMI charges are accurate?
Most commercial leases include an audit clause that gives tenants the right to review the landlord's operating cost records. You can request a detailed breakdown of all TMI components, compare your charges to the building's total operating budget, verify that your proportionate share percentage is calculated correctly, check that only permitted costs under your lease are included, and hire a professional lease auditor if the amounts seem unreasonable. It is good practice to review your TMI statement annually, especially after significant increases.
For a broader overview of what TMI means, read our What Does TMI Mean in Real Estate guide. For information on commercial broker fees, see Who Pays Commercial Real Estate Broker Fees.
Need Help Understanding a Commercial Lease?
Joe Battaglia and the Battaglia Team can help you evaluate commercial lease terms, review TMI charges, and negotiate favourable conditions. With over 25 years of real estate experience in Mississauga and the GTA, we provide the expert guidance you need to make informed decisions.