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The state contracting laws require the contractor to leave the adjacent construction area in a like condition as originally found. You definitely can sue the contractor. You can also place a lien on the property next door which will be required to be cleared prior to the sale. Go let the bank know your are going to place a lien against their property and see if you don't get a better response from them.
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What are Sacramento's fence laws regarding damage done by the contractor hired to fix the fence?
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