Net Rent, TMI, and Gross-Up: How Commercial Leases Actually Price in Ontario

Commercial space in the GTA is almost always quoted as net rent per square foot per year, plus TMI. A listing at $18.00 PSF net with $12.50 TMI is a $30.50 PSF gross occupancy cost — on 3,000 square feet that is $91,500 a year, or $7,625 a month before HST and utilities.

What TMI actually covers

Taxes, maintenance, and insurance: realty taxes, common area maintenance, building insurance, management fees, and in most cases structural reserves. It is an estimate that gets reconciled annually, so budget for a true-up.

Rentable versus usable area

You pay on rentable area, which includes your share of common areas. A gross-up factor of 10 to 18 percent is normal in multi-tenant office. Ask what the factor is before you compare two buildings on rate alone.

The clauses that matter more than rate

Permitted use, exclusivity, assignment and subletting, restoration obligations at the end of term, and the demolition or relocation clause. A cheap rate with a six-month demolition clause is not cheap.

Fixturing periods and inducements

Landlords commonly offer free rent during fixturing and a tenant improvement allowance. On a five-year deal in a soft submarket, three to six months of free rent is normal. These are negotiated, not published.

Personal guarantees

Landlords will ask for one from a new corporation. It is negotiable — a limited guarantee capped at 12 months of gross rent, burning off after two years of clean payment history, is a common landing point.

Get the offer to lease reviewed by a lawyer before you sign it. In Ontario an offer to lease is binding, and the formal lease that follows is usually just its longer form.