Are you really aware of your legal rights? Then have you never heard of the Party Wall Act 1996? (applies in England and Wales only).
If not, then getting reading this booklet from this Government website quickly
http://www.communities.gov.uk/publications/pla nningandbuilding/partywall
It is exactly to prevent you from getting the type of troubles you envisage that this Act was created.
You need a Party Wall surveyor working on your behalf (that the person undertaking the building works HAS to pay for). He will ensure that the work is undertaken in a way that prevents issues for you.
IT IS NOT MERELY ENOUGH THAT THE FOUNDATIONS DIGGING DO NOT ENCROACH ON YOUR SIDE. We had a question on AB less than 3 months ago from someone who was now suffering foundation shift because the neighbour had dug foundations incorrectly. THE BOTTOM OF THE FOUNDATIONS MUST NOT GO LOWER THAN YOUR FOUNDATIONS - see the drawings in the booklet.