When building in the inner city you encounter some situations that are almost guaranteed to cause you grief, this is just part of the project so there is no point in getting stressed out. The problem is the shoddy practices of 50 years ago that have somehow lingered on until the present moment when you need to build your infill.
This manifests itself most often in grade issues. The 80 year old house beside you was just built wrong. It may have sunk in the mud or maybe the rest of the neighbourhood has grown up around it. The issue is the houses on either side of your property are going to be too low, possibly even negative slope from the alley. This suggests meltwater from the alley could flow toward, rather than away from the old house that is usually positioned in the middle of the lot.
When building new you won't be allowed by the city to have negative drainage. Nor would you want to because negative drainage is a practice that no sane builder would consider. The problem is you are building between two negatively draining properties and when you adjust your grades it will create the appearance, among the neighbours, that you are somehow committing some injustice against them. And, of course, you should deal with their problems and fix everything because for some reason you owe them this improvement to their property.
Your grades are going to need to be higher, likely at the rear of your foundation. You may need to grade your property at the border of your neighbour at 2 ft or more above where the neighbour is just so your water will drain toward the lane. This can create some conundrum in terms of how to have the elevation drop 2-3 ft at the border. The solution is often to retain the soil on your side and you have multiple options here. The best may be just to use the new fence you are building anyway as a retaining structure. This is what we have done on the 41st project.
In order to drain toward the alley, the grade must follow the angle of the lagging boards at the base of the fence, not the existing grade. On the other side of the fence it will appear the fence is taller than it actually is. This is a feature you get permitted from the city so there can be no debate about its legitimacy. Expect the neighbour to not appreciate the situation. By building the fence on your side of the property line (and paying for it), you can resolve this situation.
The job is pretty large so I hired a landscaping crew. In years past there was simply no crews available. You'd call around and nobody would be interested in quoting the work. The recession has brought some benefits as I was able to get a skilled crew to start and meet my schedule. Now I have a new and reliable crew to hire for future work.
Here is a crew with all the tools and skills to get the job done.