What Does TMI Mean in Real Estate?
TMI stands for Taxes, Maintenance, and Insurance — the three additional costs that commercial tenants pay on top of their base rent. Understanding TMI is essential for anyone leasing commercial space in Ontario, as it can significantly impact your total occupancy cost. This guide explains how TMI works, how it is calculated, and what to watch for in your commercial lease.
The Three Components of TMI
Each letter in TMI represents a distinct cost category that tenants share proportionately based on the square footage they occupy within the building.
T — Taxes
Your proportionate share of the property taxes assessed on the building by the municipality. Property taxes are calculated based on the assessed value of the property and the municipal tax rate. In Ontario, commercial properties are assessed by MPAC (Municipal Property Assessment Corporation) and typically taxed at a higher rate than residential properties.
M — Maintenance
Costs for building upkeep and common area maintenance, including landscaping, snow removal, parking lot repairs, elevator servicing, HVAC maintenance, cleaning of lobbies and restrooms, security, and general repairs. This is often the most variable component and can increase as buildings age.
I — Insurance
Your share of the landlord's property insurance on the building structure. This covers the building itself against damage from fire, storms, and other perils. Note that this does not cover your business contents, equipment, or liability — tenants must carry their own commercial insurance for those.
How Is TMI Calculated?
TMI is calculated based on your unit's proportionate share of the building's total operating costs. Here is how the calculation works:
TMI Calculation Example
Building Details:
- Total building area: 20,000 sq ft
- Your leased space: 3,000 sq ft
- Your proportionate share: 15%
Annual Building Costs:
- Property taxes: $120,000
- Maintenance: $60,000
- Insurance: $20,000
- Total TMI: $200,000 ($10.00/sq ft)
Your Cost (15% share):
- Annual TMI: $30,000
- Monthly TMI: $2,500
- Base rent ($12/sq ft): $36,000/yr + TMI: $30,000/yr = Total: $66,000/yr
Plus HST (13%): TMI is subject to HST in Ontario, so the actual monthly payment would be $2,500 + $325 HST = $2,825.
Year-End Reconciliation
At the beginning of each lease year, the landlord provides an estimate of TMI based on the previous year's actual costs. You pay this estimated amount in monthly instalments. At year-end, the landlord calculates the actual expenses. If you overpaid, you receive a credit toward future rent or a refund. If you underpaid, you are billed for the difference, usually due within 30 days. This reconciliation process means your TMI costs can fluctuate from year to year.
What to Watch For
Review your lease carefully to understand exactly which expenses are included in TMI. Some landlords include capital expenditures (roof replacement, parking lot resurfacing) in TMI, which can cause dramatic year-over-year increases. Ask for a breakdown of historical TMI costs for the past 3-5 years before signing. Also verify how "leasable area" is measured — some landlords use a "load factor" that adds a percentage of common areas to your measured space.
Typical TMI Costs in the Greater Toronto Area
TMI costs vary significantly by property type, location, building age, and market conditions. Here are typical ranges for the GTA as of 2025:
Office Space
$6.00 — $9.50/sq ft
Class A downtown office towers typically have the highest TMI due to premium maintenance standards, higher property assessments, and comprehensive building services. Suburban office parks in Mississauga and the 905 region tend to be at the lower end of this range.
Retail Space
$5.00 — $8.00/sq ft
Strip malls and standalone retail units generally have lower TMI than enclosed shopping centres. Anchor tenants in large plazas may negotiate reduced TMI rates. Location on major corridors like Dundas, Hurontario, or Erin Mills Parkway influences property tax assessments.
Industrial/Warehouse
$3.50 — $6.50/sq ft
Industrial spaces typically have the lowest TMI due to simpler maintenance requirements and lower insurance costs. However, the GTA's industrial market has seen significant property tax increases due to rising land values and assessments in areas like Mississauga and Brampton.
Mixed-Use
$5.50 — $8.50/sq ft
Mixed-use developments (commercial + residential) have variable TMI depending on how costs are allocated between residential and commercial components. Commercial tenants in mixed-use buildings should carefully review how shared costs are apportioned.
TMI and Commercial Lease Types
How TMI is handled depends on the type of commercial lease. Understanding the differences helps you compare spaces and negotiate better terms.
Net Lease (Most Common in Canada)
The tenant pays base rent plus TMI separately. This is the standard structure for most Canadian commercial leases. The tenant sees exactly what each component costs and bears the risk of cost increases. Single-net, double-net, and triple-net (NNN) leases vary in which specific costs the tenant is responsible for, with triple-net being the most comprehensive — covering taxes, maintenance, and insurance.
Gross Lease
The landlord bundles all operating costs (TMI) into one flat rental rate. The tenant pays a single all-inclusive amount each month. This provides cost predictability but is typically priced higher to account for the landlord's risk. Gross leases are more common in smaller office spaces and some retail units.
Modified Gross Lease
A hybrid where the landlord covers some operating costs while the tenant pays others. For example, the landlord may include property taxes and insurance in the base rent while the tenant pays maintenance separately. The specific split is negotiated and defined in the lease agreement.
Negotiating TMI in Your Lease
Unlike residential leases protected by the Residential Tenancies Act, commercial leases in Ontario are governed entirely by the lease agreement. Everything is negotiable. Here are key strategies:
Protect Yourself
- Request 3-5 years of historical TMI statements before signing
- Negotiate a cap on annual TMI increases (e.g., 3-5% per year)
- Exclude capital expenditures from TMI pass-throughs
- Verify the measurement method for your proportionate share
- Include the right to audit the landlord's TMI calculations
Common Pitfalls
- Focusing only on base rent and ignoring TMI when comparing spaces
- Not accounting for HST on TMI payments
- Signing without understanding year-end reconciliation obligations
- Overlooking management fees included in maintenance costs
- Assuming TMI will stay constant over a multi-year lease
Important Note for Business Owners
TMI can represent 40-50% of your total occupancy cost. A space advertised at $12/sq ft base rent with $8/sq ft TMI actually costs $20/sq ft — a significant difference. Always calculate the total gross rent (base rent + TMI + HST) when budgeting for commercial space. The Battaglia Team can help you understand the full cost picture for any commercial property in the GTA.
TMI vs. Residential Maintenance Fees
If you are familiar with condominium maintenance fees, TMI works on a similar principle but with important differences:
Commercial TMI
- Based on estimated costs with year-end reconciliation
- Costs can fluctuate significantly year to year
- Terms are fully negotiable in the lease
- Subject to HST
- No statutory protections for tenants
Condo Maintenance Fees
- Fixed monthly amount set by the condo board
- Includes reserve fund contributions
- Governed by the Condominium Act
- Typically includes water and building insurance
- Property taxes billed separately to the unit owner
Frequently Asked Questions
What does TMI stand for in real estate?
TMI stands for Taxes, Maintenance, and Insurance. It refers to the additional costs that tenants pay on top of their base rent in a commercial lease. These three components cover the tenant's proportionate share of property taxes, building maintenance and common area upkeep, and the landlord's building insurance. TMI is sometimes called 'additional rent' or 'operating costs' and is most commonly associated with commercial real estate leases in Canada.
How is TMI calculated in a commercial lease?
TMI is calculated based on your proportionate share of the building's total operating costs. The landlord divides the total annual costs for taxes, maintenance, and insurance by the building's total leasable area, then multiplies by your unit's square footage. For example, if you lease 2,000 sq ft in a 20,000 sq ft building, you pay 10% of total TMI costs. The landlord provides an annual estimate, you pay monthly instalments, and at year-end the actual costs are reconciled — you either receive a credit or owe the difference.
What is a typical TMI cost per square foot in the GTA?
In the Greater Toronto Area, TMI costs typically range from $5.00 to $9.50 per square foot annually, depending on the property type, location, and building age. Newer buildings with modern systems may have lower maintenance costs but higher property taxes, while older buildings may have higher maintenance but lower assessed values. In Mississauga's commercial areas, TMI commonly falls between $6.00 and $8.50 per square foot. Always factor TMI into your total occupancy cost when comparing commercial spaces.
Can TMI be negotiated in a commercial lease?
Yes, TMI terms are negotiable in commercial leases. You can negotiate a fixed TMI rate (capped increases), which specific expenses are included, and whether certain capital expenditures are excluded. Some tenants negotiate a 'gross lease' where TMI is bundled into one flat rate, providing cost predictability. Others negotiate caps on annual TMI increases (e.g., no more than 3-5% per year). Having an experienced commercial real estate professional review your lease terms is essential.
What is the difference between TMI and a gross lease?
In a net lease (where TMI applies), you pay base rent plus your share of taxes, maintenance, and insurance separately. Your total cost fluctuates as these expenses change. In a gross lease, the landlord bundles all operating costs into one flat rental rate. Gross leases offer predictability for tenants but are often priced higher to account for the landlord's risk. Modified gross leases fall in between — the landlord covers some costs while the tenant pays others. Each structure has advantages depending on your business needs.
Does TMI apply to residential real estate?
TMI is primarily a commercial real estate term. In residential real estate, similar costs exist but are structured differently. Condominium owners pay monthly maintenance fees that cover building insurance and common area upkeep, while property taxes are billed separately. For residential tenants in Ontario, the landlord is responsible for property taxes and building insurance, and these costs are factored into the rent. The Residential Tenancies Act protects residential tenants from being charged TMI-style additional costs.