Do I have any grounds for this, since neighbors are breaking the lease they signed? If so, how do I proceed?
You likely do. Your situation resembles the notion of quiet enjoyment. See Midway Park Saver v. Sarco Putty Co., 976 N.E.2d 1063, 1073 (2012):
A covenant of quiet enjoyment is implied in all leases and is breached
when there is actual or constructive eviction of the lessee by the
lessor of the property. [...] [B]reach of the covenant of quiet
enjoyment may be found without finding that the lessor intended to
deprive the lessee of possession of the property
(citations omitted).
You need to assess the lease from the standpoints of (1) landlord's negligence or refusal to enforce the no-smoking clause with respect to the smoker, (2) constructive breach (meaning that the landlord's conduct basically leaves you no option but to breach the lease), and (3) smoker's tortious interference with your lease. Standpoints (1) and (2) are largely equivalent.
The terms of the lease are unlikely to [explicitly] sanction the landlord's non-enforcement of the clause. But there are at least two legal arguments that favor your position:
The mere existence of no-smoking clause induces a tenant's reasonable expectation that the landlord will enforce the clause across the board. That inducement occurs at the formation of the contract, if not earlier.
The landlord's pretext that it "can't do anything about it due to Covid-19" reflects landlord's implicit acknowledgment of the aforementioned expectation of enforcement. Make sure you have that landlord's statement in writing so you can file it in court if need be.
The option that involves suing the smoker has the purpose of making him responsible for the penalization if you breach the lease. There is no contract between you and the smoker-tenant, but his repeated violations of a clause of which he was aware clearly disrupt the enjoyment to which you as tenant are entitled (and ultimately your contract with the landlord). This type of claims is known as tortious interference with relation.
Prior to suing the smoker, you might want to send him a cease and desist letter letting him know of the legal ramifications of his conduct. This might obviate both breaching your lease and court proceedings altogether. Regardless, make sure you have proof that the smoker received your letter.
