If a neighbor starts to build on what you think is your property, do something immediately. If the encroachment is minor -- for instance, a small fence in the wrong place -- you may think you shouldn't worry. But you're wrong. When you try to sell your house, a title company might refuse to issue insurance because the neighbor is on your land.
Also, if you don't act promptly, you could lose part of your property. When one person uses another's land for a long enough time, he can gain a legal right to continue to do so and, in some circumstances, gain ownership of the property.
Talk to your neighbor right away. Most likely, a mistake has been made because of a conflicting description in the neighbor's deed or just a mistaken assumption about the boundary line. If your neighbor is hostile and insists on proceeding, state that you will sue if necessary. Then send a firm letter -- or have a lawyer send one on his or her letterhead. If the building doesn't stop, waste no time in having a lawyer get a judge's order to temporarily stop the neighbor until you can bring a civil lawsuit for trespass before the judge.