Russell Johnson, whose home is behind the development at 3 Tudawalli Place, Chapman, said surrounding residents were approached by the designer, VRD Design, which told them work had stopped because the structures were 1.53 metres higher than originally planned.

The problem was put down to a "mistake", Mr Johnson said.

"A retaining wall which was not on the original plan was built to cater this huge mistake and this alteration in the building now means that that we have a privacy issue with the bottom and second floor."

The dispute in Tudawalli Place comes as the mass buyback and demolition of Mr Fluffy asbestos-contaminated homes enters its final phase, with new owners rebuilding on the cleared blocks.

The ACT government controversially changed planning rules to allow Fluffy blocks over 700 square metres to be divided in two and used for two houses. Unlike other dual occupancies, the two homes on Fluffy blocks can be sold as separate titles. The new homes are set to change the face of some of the established, older suburbs.

The Chapman neighbours objected to the original dual occupancy plans but Mr Johnson said he and wife Joan accepted the neighbouring development once it had been approved.

Now, they find the height overwhelming - with a new retaining wall built to cater for the "mistake" in height.

The frame of the first storey on the higher neighbouring property was built at the end of last year. Mr Johnson the ground level was now almost at the same height as his back fence.

"The reality of the height of the beginning of the project shocked and disgusted us when some wall frames were erected.

"Workers standing on the slab could see directly into our yard, pool, kitchen and family room. Just stepping into the yard now was always a shock as we had to look into the structure and see the workers.

"We had a little oasis here and then when they cut the trees down and started building the structure it's turned us into a goldfish bowl.

Mr Johnson said he had lived in Chapman for more than 30 years and had enjoyed "total privacy in our backyard".

"Our concerns are not only for our privacy but also for the devaluation of our Chapman property. We feel that it is totally unfair to have bought into a RZ1 zone and then must contend with a Mr Fluffy property that have the rights of a RZ2 zone ...

"This development has seriously affected us for our privacy, screening expenditure and devaluation of our property."

The Johnsons now fear the new application for a higher building will be approved.

VRD Designs did not want to comment on questions from The Canberra Times. Director Robert Valk said, "Due to the time of year, not all stakeholders are up to date with the project and therefore do not expect to be able to respond any time soon if at all."

An Access Canberra said it had "stringent planning procedures in place for all developments to follow. It is up to private developers to meet them in order for the building to pass certification."

The development application was approved in April last year for a dual occupancy and the drawings were endorsed in June.

The original approval raised privacy concerns, saying given the site was sloping, the design had a single-level at the front and two storeys at the back.

"The new dwellings including the outdoor dining/balcony areas are proposed at the rear of each of the dwellings which achieve the rule requirement of a 6 metres setback, however the assessment has identified that these areas are not sympathetic to the adjacent properties' private open space."

The rule said "a person at 1.5 metres should not be able to see directly into an adjacent dwellings [private open space] for more than 50 per cent."

"The proposed design nominates a glass balustrade, however this is not considered to provide reasonable privacy to the adjacent properties' private open space. A condition has been applied requiring the balustrades to be amended to meet the minimum 1.5 height and to be screened.

After worked stopped, the developer submitted a new development application on December 22 to raise all floor levels.

The spokesperson said the new application had been submitted but not formally lodged. The planning directorate was yet to assess whether the application could be lodged and whether to renotify the application.