Agree with that. If your neighbour would rather have to look at an unfinished wall rather than give your builders access to render it to a decent finish, then let her. You'll never see that face of the wall. As long as it's watertight why worry about it?
The render is typically for the u-value calculation not protection of the wall. Check with your designer if compensation is required.
Check your blocks with the manufacturer, they should be exterior rated, but if not there are many that are.
Tell your neighbour you will be forced into this and that the wall will look a right ugly, mortar smudged mess. See if you can find a photo to illustrate.
And this would be the only time I'd recommend using crap bricklayers.
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