Minimum set back distance for extension wall?

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Our neighbours are proposing a rear single storey infill extension to their property: it's a terrace adjoining ours. The plans show the new side wall of the extension to be set back 6 inches from the property boundary line (our fence). The height will be 3 metres, brick built, flat roof.
What is the minimum set back distance required in order for them to excavate and build the foundations without encroaching beyond the boundary line?
If we refuse permission for them to access beyond the boundary line (even temporarily) for the purpose of building the foundations, what are their options, other than to set the wall back further? Can we refuse such permission?
 
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Why don't you approach them to set up a party wall agreement (hopefully at their cost) and then let them build on boundary line. The associated paperwork can be attached to your deeds. The advantage with that arrangement is if you or successors wish to do similar you do not end up with a gap between the 2 extensions which becomes a rubbish trap which will make all walls damp, be difficult to keep clear of the rubbish.
I'm surprised that their architect didn't suggest that approach.
 
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Yes, we will expect them to serve a PWA regardless, as the work is within 3m of our walls, but we do not want them to build up to the boundary line because this will affect our outlook and sunlight levels from the rear room even more than the current proposal. I take your point about leaving a narrow gap, but we have no plans to extend on our side, and if necessary we could remove the fence as far as the end of the new wall, since it is our fence.
 
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To be honest you cannot stop them building up to the boundary line so you might as well try to find a mutually agreeable compromise.

If you try to stop them (unsuccessfully) by racking up party wall fees I suspect they will be less cooperative.
 
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Yes, we will expect them to serve a PWA regardless, as the work is within 3m of our walls,
But are their foundations going to be deeper than yours, which is the criteria you missed off there?
 

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