There is no reason to install your irrigation system ON the property line. When you install sprinkler heads along a road or side walk, you install them a few inches AWAY from the boundary (or at least you should). Keep in mind, the water isn't going to only soak strait down. At the edge of where you are watering, it's going to hit the ground and then spread and get enough water along the couple of inches near the boarder.

Additionally, think about what would happen if your neighbor installs a system a few year down the road? If you are both trying to install stuff right on the property line, you are more likely to run into a conflict.

Think of the dispute that COULD erupt if (from your neighbor's point of view) that he's carefully measured the location of the property line and starts installing a system of his own. But because of a mistake, some of your equipment is a few inches of what (he thinks) is his property and he destroys a part of your system while (he thinks) he is staying on his side of the property line. Obviously you're going to think you didn't make a mistake, he thinks he didn't, something gets damaged, and you start and argument over who is going to fix it. You want him to fix it because he damaged it, but he says it's your responsibility because your stuff was on (what he thinks) is his land.

And as for making sure the water doesn't drop onto your neighbors' property... because of winds, you'll never be able to avoid it. So the biggest thing is going to be to follow the "Golden Rule". Try to make sure your design and operation of YOUR irrigation system isn't a nuisance to him.

That's exactly why I'm asking - the neighbor has not gone to settlement yet, and the builder has just installed a system ON OUR PROPERTY LINE! We already have a flooding problem due to the builder's incorrect grading, and now this. I'd like to argue that it can't be on the property line, but I don't know what source I can reference when I go to the builder.