A neighbor on the top floor of our building got permission to add onto the roof a “yechidat diyur”. The Arab workers destroyed the newly renovated garden on the bottom floor. Does anyone have to pay for damages? If not, is there anything to be done (they are still building)? How can neighbors protect themselves from damage that no-one is liable for?
If the Arab workers caused damage as part of their work, and there is no way to get the money from the workers themselves, the neighbor who contracted them is liable to pay for the damage.
Even if the damage is unrelated to the work itself–and it sounds unrelated, because the work is on the top floor, and the damage is on the bottom floor–it is possible that the neighbor will be liable for damages, and this will depend on the decision of a Beis Din.
Either way, it is certainly proper practice for the neighbor to repair damages caused by his workers.
If damage is caused by workers as part of the their work, the Shita Mekubetzes (Bava Kama 98b, citing from R’ Yehonasan; see also Meiri) writes that the ba’al ha-bayis is liable (provided the workers are po’alim and not kablanim).
However, this applies only to damage caused as part of the work done, and not for damage unrelated to the actual work (see Shut Sha’arei Yosher, Choshen Mishpat 10).
There is further room to see the neighbor as liable for the damages, based on the ruling of Rema, Choshen Mishpat 388:15, according to which a person who sends an envoy who is “muchzak lehazik” (extremely prone to damage) is liable for the latter’s damages. Althouh the Shach disputes this ruling (see Pischei Teshuvah 7), authorities generally rule like the Rema (see Divrei Chaim 2:46 who writes that the halachah certainly follows the Rema). See also Divrei Geonim 15:27 concerning somebody who sent a lawyer and caused legal damages.
Based on this, it is possible to see the Arab workers as being “extremely prone” to cause damage, in which case their “sender,” meaning the neighbor who contracted them, will be liable to pay for the damage. However, this will depend on individual circumstances, and it is difficult to reach a clear-cut decision on what is considered “muchzak lehazik.”
A further possible consideration is that the neighbor will be obligated as a shomer, a “guardian” for the communal property (Choshen Mishpat 176:8; see Pischei Teshuvah 10). Although there is no guardianship for land, the Shach (301:3; 66:126) rules that a guardian is nonetheless liable for peshiah.
As you write, if the neighbor is exempt from paying damages, this will place the other neighbors in a very difficult situation, and it is without doubt proper practice for the neighbor to pay for or repair the damages caused.