I think it was more to test their attitude rather then make an agreement, sounds like a good test in principle but might not be phrased in that way as they'd be offended for sure and not be happy to have you move in. Bear in mind the extension may well predate the current owners of that house too.
Precisely; the present occupiers of the adjoining house may be completely innocent of this, and may feel just as miffed by their own situation in buying a property with an extension which did not comply with b/regs and trespassed.
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