The exact same issue happened to me earlier in this map.
On the East Road, leaving spawn (365, 15), I built a well terraformed hill and spent a ton of time making it look realistic, instead of having my shop built, floating in the air with crappy support. Then I put my shop on top of the hill and it looked great.
Then, in an attempt to get their shop closer to spawn then mine, someone built on the edge of my hill(340, 0), some crappy ugly box shop with stonebrick and netherbrick. Another shop appeared on my hill, a potion shop. Then, someone put a single chest shop right on the hill's grass RIGHT in front of my shop(367, 0).
Both were decided to be legal. The reason, even though the hill was player-made, was that "maybe they thought it was real, it looks good so it's understandable." (Not exact word for word, but yeah).
So, I felt like I was being punished for spending time designing it all, making it look realistic, then just had someone build right on top of it. I probably wont be spending much effort to create a good looking shop again, when people can build in front of it, or against it.
But, when the staff decided it was legal, I dropped it and let it go.
Now I know. Simple as that.
Though, I agree, things player made should be given leway to structures built near by, including terraformed land. 5 blocks at least.