I live in a middle terraced house, and have recently had a conservatory erected.
I informed my neighbours more than 2 months prior of my intentions of the conservatory. I removed part of our party wall and replaced it with a half brick wall as part of the conservatory and footings.
I also told her again a week before the building work was to take place. She received a full verbal explanation of the plans, and at no point expressed any concerns or queries.
Now the conservatory is complete i have received a hand written letter from her stating she has taken legal advice and asking if i was aware i would be encroaching on her land, and if i was aware, that she would be seeking some form of compensation for loss of land. She also states that she should have legally been served with a letter stating that the party wall was to be removed and plans of the building.
I do not believe that i am encroaching on her land and if i am its no more than an inch (i will get the deeds to check this).
I was unaware of the party wall act and so thought that that a full verbal explanation would have been ok seeing as she expressed no objections at any time.
Your neighbour is correct to say that she should have been served with a notice under the Party Wall Act. For the work that you describe it would be a Party Structure Notice which should have been served 2 months before work started. As the work is now complete you cannot serve notice and there are no penalties under the Act for not having done so.
The encroachment is a separate issue and one that would be impossible for me to comment on in detail. What I would say is that if the encroachment is only an inch them that is too small a margin for the courts to consider.