Non-compliance with the development plan by the neighbor

I did nothing unlawful.

No, but you are planning something unlawful, for which you want to anonymously report your neighbor to the authorities. The fact that the terrace there is not permitted is not due to neighbor-protecting regulations. He could have built lawfully like this: It would be even closer to your terrace. He would not have had to ask you. You could not have done anything at all.

To be honest, I don’t even know what I’m supposed to address there

The missing fence. And if you place your garden shed on the property boundary and the building boundary, you have a legal privacy screen, unless you have already exhausted your maximum boundary construction.

Aren't minimum distances to boundaries applicable for terraces that are directly adjacent to the house? At least I seem to remember that. From the location perspective, I would of course prefer to build my little house further forward (beyond the building boundary). Probably also more on the right side, of course only in consultation with the right neighbor.

I’m starting to believe you mainly want to complain here, our compassion and cuddles. But that doesn’t solve your problem at all.

(and just to clarify, at least I never claimed that your neighbor did nothing wrong – it still doesn’t help you if someone here in the forum also says that your neighbor did something illegal)

I've been following along from the beginning, all the responses were more or less as expected, and yet you have been offered any direction in detail - repeatedly -. It is obvious that you don't want to talk to your neighbor. You respond almost not at all to this most obvious suggestion. Why??? What is the reason? What exactly are you afraid of? Instead of finally taking action here, you are going around in circles in this thread. Nothing "new" will come of it, let this be closed and get your supposed confirmation elsewhere or - better - finally overcome this hurdle and talk to your neighbor and report here what the result of this conversation was, then maybe we can see further...

Do minimum distances to boundaries not apply to terraces that are directly adjacent to the house?

This is not so clearly formulated in your Neighbor Law. Here with us (NRW) it is somewhat clearer. It refers to terraces that are located between an exterior wall of a building and the boundary. But even if the 2.5m had to be observed there, it would be more disturbing there than by the water.

of course only in consultation with the rightful neighbor.

But he cannot give you planning law approval.

Besides, a terrace is something different from a small garden shed....my opinion.
That’s how he sold it at the beginning.

Are you sure that it is a terrace and not the foundation for the garden shed? Maybe the garden shed is still coming?

Best regards
Sabine