Why did the TMI go up in my commercial real estate lease?

T.M.I. (also known as CAM and additional rent) is a common feature in a commercial real estate lease and it represents the expenses for the property. Sometimes when tenants see this figure in their lease they assume it's a fixed number throughout the term, but it's not, and it can't be. Expenses are different every year.

Because TMI represents taxes, maintenance, and insurance, a year to year change in any of those expenses can have an impact on the TMI rate you pay. For example, it's widely known that property taxes steadily increase over time and in my market (the Niagara Region) property taxes usually makes up the largest portion of TMI. Insurance often the smallest also has the ability to increase gradually over time. The same can be said about maintenance depending on how much is required and whether or not labour rates have increased (they recently have in Ontario). For this reason TMI has the ability to increase year to year to ensure the property expenses are fully covered and it doesn't impact the landlords net rent on the property.

If you have been served notice that there has been an increase in your TMI, it would be best to comply with the increase otherwise you risk being in default of your lease. While this may seem unfair to some tenants this is standard industry practice and usually warranted. My lease allows tenants to request proof of expenses to ensure they aren't being ripped off by false claims the landlord intends to pocket. If you're about to sign a lease that doesn't allow you to request proof of TMI expenses, you should really work with a commercial real estate broker that knows how to negotiate that into the document.

 TMI isn't as confusing as you may think, you just need to be working with the right agent to explain it properly. Don't expect this knowledge from Realtors that don't have a strong specific focus on commercial leasing.