Commercial properties are often managed differently than residential properties when it comes to expenses and taxes.

One of the biggest differences is the use of TIMs (Taxes, Insurance, and Maintenance) and the ability to recover these costs from tenants.

Understanding how TIMs work will help ensure expenses are recorded correctly, tenants are billed properly, and commercial accounting remains accurate.

TIM stands for:

These are common operating expenses incurred by the property owner to operate and maintain a commercial building.

Unlike many residential properties, commercial leases often allow the owner to recover some or all of these costs from tenants.

This means that while the owner initially pays the expense, the tenant may ultimately be responsible for paying their share.

Examples of TIM expenses include:

These expenses are usually paid by the property and then allocated to tenants based on the terms of their lease.

The property receives a bill and pays the expense.

The property receives a property tax bill for $12,000.

The bill is recorded against the commercial property and paid from the property's Rent Trust Account.

At this point:

The expense must always be recorded first before it can be recovered from tenants.

Most commercial leases define how TIM expenses are shared among tenants.

A tenant may pay:

A building has two tenants:

Property taxes total $12,000.

The recoveries would be:

The owner paid the tax bill, but the tenants reimburse their portion through TIM recoveries.

One of the most common questions in commercial accounting is:

"Do I charge GST/HST when billing tenants for TIM expenses?"

In most cases, the answer is yes.

Many property managers become confused because the original property tax bill often does not contain GST/HST. However, the tenant recovery charge is generally considered part of the commercial lease arrangement and is usually subject to GST/HST.

The property receives a property tax bill for $10,000.

The owner pays the bill and records the expense.

Later, a tenant is responsible for 20% of the building's operating costs.

The tenant's share of the property tax is:

When billing the tenant, GST/HST is generally applied to the recovery amount.

The tenant pays both the recovery amount and the applicable GST/HST.

The original property tax bill is not subject to GST/HST.

However, when the landlord bills the tenant for recoverable operating costs under a commercial lease, those charges generally become part of the commercial lease arrangement.

Because of this, GST/HST is typically charged on the tenant recovery.

This applies to many commercial recoveries, including:

The original expense remains a property expense.

The tenant charge creates recovery income for the property.

Property Tax Expense:

Tenant TIM Recoveries:

The expense and recovery should be tracked separately.

This allows owners to clearly see:

Keeping these amounts separate creates more accurate reporting and easier reconciliations.

Many commercial leases require an annual TIM reconciliation.

A reconciliation compares:

The real expenses incurred during the year.

The amounts collected from tenants throughout the year.

If there is a difference:

Estimated TIM charges collected:

Actual TIM expenses:

Difference:

Additional charges may be created to recover the shortfall.

When a property is set up as a Commercial Property in Propra:

This helps ensure commercial expenses and recoveries are tracked correctly.

Always record the expense before creating tenant recoveries.

Review the lease carefully before allocating expenses to tenants.

Do not offset expenses against recoveries.

Track both independently for accurate reporting.

Ensure tenant recovery charges include the appropriate GST/HST settings.

Regular reconciliations help ensure tenants are charged fairly and owners recover eligible costs.

TIMs are recoverable commercial property expenses that generally include:

The property pays the expense first.

The expense is then allocated to tenants according to the lease terms.

When tenants are billed for TIM recoveries, GST/HST is generally applied to those charges, even if the original expense did not include GST/HST.

Commercial properties in Propra include tools to help manage:

Following these processes helps keep your commercial accounting accurate and ensures owners recover eligible operating costs from tenants.