Absolutely. All parties to the original deed need to be party to any deed varying its terms.It sounds totally on the neighbour to get over being wrong if they want to sell the house.
You might humour them for whatever reason and sign away the land you're meant to be sharing but won't the freeholder have something to say about an alteration like that?
Also, your mortgage co (if you have one) will require that they have sight and give formal consent to any such deed of variation (since you're altering the security on which they based their loan). Again, this will attract a cost that the neighbour requesting the variation is normally expected to cover.