We have one room where there is a section of about three feet that leaks from the side at the buttom when it rains. On the other side of the wall is my neighbors yard. They have a flower bed and the soil is at the same level of the foundation and in some parts is soil is above the foundation; and there are no drainage in their flower bed. I am concerned because I noticed that the wood that holds the carpet is it has rotten. Can some one give me a solution for this problem.

Have your neighbor drop the soil level. There should be 6" from soil to sill plate. You are very exposed to termite damage! Is there no property line setback?