Try and work it out if you can; you have to live next to each other. Mediation is a good alternative.
Here is an example of what can go wrong (could be an urban legend):
This is a true story, it happened in Utah and was on the news!
Here's the story. A city councilman, M., lives in this neighborhood. He had a beautiful view of the east mountains, until a new neighbor purchased the lot below his house and built.
Apparently, the new home was 18 inches higher than the ordinances would allow, so M, mad about his lost view, went to the city to make sure they enforced the lower roof line ordinance. M. and his new neighbor had some great arguments about this as you can imagine - not great feelings.
The new neighbor had to drop the roof line - no doubt at great expense. Recently, M. called the city and informed them that his new neighbor had installed some vents on the side of his home. M. didn't like the look of these vents and asked the city to investigate. When they went to M's home to see the vent view, this is what they found...
