I wonder if the rats are getting through to his side because the loftspace is not built-up to the rafter height in masonry? Many terraced houses were built like this and it causes a security problem as well, since it is possible to get from one property to the next by going up through one loft hatch and down the next one along.
If that is how the rats are getting across, I'd be inclined to be putting stud partitioning in there across the top of brick wall partition and plasterboarding both sides. An additional cost for him, I know, but it will stop the rats getting across - and it should be done on security grounds anyway.
If that isn't how the rats are getting across, then has he worked out their route?
Regarding the state of the property next door, he may unfortunately have to spend more time chasing up the landlord (via the letting agents if necessary) to assert his unhappiness - the council can unfortunately only do so much.
Perhaps CAB can help him with advice on legal redress, should he wish to consider claiming for his losses.