Basically, what is known as a Calderbank offer is a 'without prejudice;' offer to settle a dispute to avoid the extra costs and associated risks of a full referral.From Calderbank v Calderbank [1976] and originally confined mainly to family property disputes, an offer of settlement made before the trial of an action and contained in a letter written '�without prejudice'�, but expressly reserving the right to bring the letter to the notice of the judge on the issue of costs after judgment in the action if the offer was refused, was held to be admissible on the question of costs, without the consent of both parties to the action. In Cutts v Head [1984], the Court of Appeal approved the procedure, making it generally applicable to disputes where, for some reason, a payment into court could not be made.A Calderbank offer in a rent review arbitration differs from a Part 36 offer in litigation in that there are no established rules of procedure governing it, corresponding to Part 36. The way in which an arbitrator should react to a Calderbank offer is a matter for his discretion, although there are a number of cases that provide useful guidance.At rent review, a Calderbank offer is only going to be effective where the dispute procedure is either referral to an arbitrator (including a surveyor acting as arbitrator) or to a surveyor acting as an expert and where the lease authorises the independent surveyor/expert to determine costs. If the lease does not authorise the independent expert to determine his costs and/or the parties' costs then a Calderbank offer would have no efficacy.Also, if the lease contains any other condition that could de-authorise the independent expert's role on costs then whether that condition would apply would depend on the circumstances. For example, in a matter where I was acting for the tenant, negotiations had reached an impasse, the landlord's surveyor initiated the referral procedure and an independent expert determined a rent that was favourable to the landlord. Although the lease authorised the independent expert to determine the parties' responsibility for his costs (but not the parties' costs) that authority could only be exercised if the landlord had proposed a rent at the onset. Since no proposal of rent had been made, the independent expert had no jurisdiction on costs. Although you might wonder how a dispute could have arisen when there was no proposal to begin with, a proposal is only necessary if the lease so requires or the parties would like some formal basis for the negotiations.I am not going into detail as to the wording of a Calderbank, because I don't want to prejudice my position by giving the game away when acting for clients. Suffice it to say, the policy of the court is compromise of disputes. Since the object of a Calderbank offer is to protect the offeror party's interest on costs, the rent stated as acceptable is not necessarily the offer's opinion of market rent for the review. The offer is simply one of compromise.Either party can make a Calderbank offer and number of Calderbank offers can be made during the course of negotiations and ensuing proceedings. In proceedings, the cut-off date is normally before the rent is known. A Calderbank offer does not only have to be on rent, it can also be on costs. A Calderbank on costs is usually made after the rent is agreed or ascertained and the issue is the parties' responsibility for the costs. When more than one Calderbank offer is made, further Calderbanks do not necessarily automatically cancel previous Calderbanks. As for which party is entitled to disclose the Calderbank to the third party, that would depend upon the wording.With arbitration, the arbitrator has jurisdiction on his costs and the parties' costs. With independent expert, the extent of the jurisdiction is as stated in the lease.The general rule that costs follow award is not sacrosanct, it depends upon the circumstances and merits of the case. Whether to make a Calderbank offer or not requires careful consideration. Concern is that the landlord or tenant could accept the offer and hence be done out of a higher or lower figure had the referral runs its course.On referral, the third party costs can mount up. Generally, be they acting as arbitrator or independent expert, the going rate for surveyors acting as third party is between �250 and �350 an hour, plus disbursements and VAT. Also, there is the RICS fee for processing the referral application. There is no set-scale of charges: arbitrators can charge on whatever basis they like, although if the costs cannot be agreed then per the Arbitration Act the costs can be taxed - meaning the costs can be referred to the court for checking and scrutiny. For any particular matter, it is difficult to estimate what the costs are likely to be. Ignoring the parties' own costs, a relatively straightforward matter can easily cost several thousand pounds to resolve. Some surveyors will agree to cap their costs to a pre-agreed figure, but whether that cap would remain in place would depend upon how the matter pans out. Even what appears to be a simple straightforward matter can take a long time from start to finish. When you put your mind to agreeing procedural requirements then writing a 10,000 words submission, it can be fascinating what lines of enquiry there are to be found. And since arbitrators can and do charge from the moment they are instructed, even when the review is agreed without much involvement on their part, their final bill can still be thought astronomical considering they haven't done anything very much.Whether better to accept the Calderbank offer or allow the referral to take its course depends upon how much is at stake. Sometimes, Calderbank offers are used as negotiating ploys. The prospect of having to fork out several thousands pounds of non-recoverable expense when the chances of getting much if any increase are unlikely is enough it itself to deter. Typically, the estimated total costs are divided by the review period to calculate the benefit per annum. For example, �5000 costs divided by a 5 years review interval is �1000 a year extra rent required. Where the bluff is called and there is scope for further compromise on rent, it may be possible to split the difference.It is standard practice for the third party's costs to have been paid in full before the rental outcome is known. Where the parties or their advisers are reputable, one would not expect the third party to want any advance payment. Once the rental outcome is known, whether the Calderbank would have to be disclosed to the third party would depend upon whether the parties can resolve the matter between themselves. In a matter I dealt with last year for a tenant, the landlord's surveyor withdrew a Calderbank long before the proceedings were underway. In the context of the withdrawn Calderbank the outcome was favourable to the landlord, but the landlord lost out on costs because his surveyor in reasoning to the arbitrator has overdone the opinion, so in the context of that opinion the outcome was more favourable to the tenant.To whom the party's costs are payable is a subject that doesn't appear to have been openly explored, perhaps because it is something to keep quiet. For the landlord, I am dealing with a matter where the legal tenant is a dormant company. The rent is agreed. the memorandum completed. The tenant's Calderbank offer on costs accepted, the landlord is responsible for the tenant's costs. The amount of costs is not in dispute. I have told the tenant's surveyor that I am not willing to recommend payment of the costs to the tenant's surveyor, only to the legal tenant and not until my client has received an invoice from that tenant. It might be thought that payment direct to the tenant's surveyor amounts to the same thing, but it is not. The use of dormant companies to ring-fence the lease from the trading company is widespread, but where payments between landlord and tenant are involved there may be tax implications to which an honourable landlord would not want to be complicit; in this day and age, anything amiss is the stuff of social media and investigative journalism!