A.H.
My advice is definitely talk to your neighbors. If you simply rehome their animal (regardless of the apparent treatment), they could come back and sue you. I would explain the situation, and tell them that you can't handle their dog along with yours and you need them to take care of this. If you can't get assistance at that point, I would recommend going to the homeowner's association (if applicable). Then proceed to the humane society, then police if necessary.
You don't have to make an enemy, just explain what you are observing, and why you need it stopped. Good luck!