It is up to them what pipe they use or not use. If they ask my advise, I’ll pass it on.
I’m of course speaking on your end, your property, to solve the problem they’ve created. I’m moving on now. Best of luck.
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The reality is you can cut their pipe off at your property line. I’m not going to argue about the legality of that. When you do that water will still pour out the end of their pipe. After that the water will seek to flow downhill, WHEREVER that takes it. Obviously you can also build up a berm on your property to try to funnel that water. Again, not speaking to legallity. Not sure where you plan on directing it too but in the end it will keep flowing downhill. I’m sure you already know this but wanted to bring up that it’s new home will take the water somewhere new and hopefully won’t cause a new issue.
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@sushiritto No need to move on. I appreciate your opinion. You sound very well informed. your posts were helpful.
@MarylandJOE Yes, what you say is completely correct. I hope since they are forced to deal with it, the neighbor will take it up from there and do the right thing; properly disposed of the water. If they don’t, the berm will be long and the water would have absorbed in the ground before it reaches the end of the berm.
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We had a similar problem at the first house I owned, the house on the upper side(newer construction in an older neighborhood) had all of the water from their gutters and everything going into a pipe which they had run up to the fence of our backyard so that it was dumping all of it right across our backyard. They were unwilling to remedy the situation, my ex-husband took that spray foam and filled the end of the pipe with it. They just cut off the end of the pipe opening the flow up again, of course he filled it again. It was an ongoing war between them right up until we sold our house, not sure what happened after that. Probably not a good way to handle things, but the neighbor was a jerk, so no reasoning with him.
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You should all move to Colorado where you can’t direct the water off your own property at all (maybe with a permit). People downstream have the right to that water and you have to let in go back into the soil as groundwater. We weren’t even allowed to have rain barrels until a few years ago and now can only have one 55 gallon barrel.
Of course we also shovel any snow back onto our lawns - we want all the water we can get, so no way would we send it to our neighbors for free.
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A side note… This is what happens when a lot of water flows downhill…
It was an 8 inch water main break, but now it is a chicken/egg problem: was the landslide caused by the break or vice versa?
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The goal here is to have as much go back into the ground as possible too. Any that doesn’t has to be treated/cleaned before it can be released anywhere. For sewage, it’s treated via individual systems anyway, assuming one isn’t on public sewer. Certain systems have to be inspected annually to be sure they’re working properly.
Runoff water into creeks/rivers is really frowned upon.
Permits are needed for essentially anything water, or building, related. Places get inspected to be sure they’re in compliance. H is handling a “new” (to him) one now where the folks just did what they wanted to do and need to have it in compliance by the 24th or get fined. It wasn’t discovered when they did it, but somewhere down the line it was.
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This reminds me of a scene in Where’d you go Bernadette? (which takes place in Seattle), where her backyard basically slides off into the house behind hers.
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That part the book got right - we have lots of hills and rain… and that combo results in occasional landslides. What the book got wrong is that blackberries stabilize slopes. They don’t. 
Back to OP’s issues.
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BB, The foundation wall is 8’ deep. It will take a lot to move the foundation. My engineer was overtly cautious when he referred to eroding foundation, I think.
@HeartofDixie I think my neighbor is a jerk, too. Whenever I bring up the issue, he launches a lecture, how water runs downhill, etc. Gets pretty patronizing. He is too arrogant to realize how patronizing it is. Interestingly, they are the one who needs favor from me, not me from them.