Bullies surface everywhere in life, but it's especially frustrating when you have to deal with one in your home life. Your house is ideally where you go to escape the pressures of the world; the one place where you are guaranteed to be able to unwind. Bully neighbors obviously make this a bit difficult. Whether they park their cars on your property or let their tree limbs grow onto your lawn, you almost feel powerless to do anything. They're manipulative types, as most of their wrongdoings fall just short of illegal and they know you can't call the police. However, with some patience and determination, there are ways to deal with bully neighbors.
Stay calm and avoid getting outwardly angry. Bullies feed off of knowing that they've gotten the best of you. In time, you will formulate a plan, but at first, keep your cool. Take a long, hard look at what the problem is and ask yourself what the most diplomatic — and legal — route to take is. Take a minute to understand the nature of a bully and that he is doing what he is doing because he is probably unhappy with his own life, as this will help curb your anger a bit.
Approach the bully about what it is he's doing that bothers you. Opt for the "kill 'em with kindness" approach and be exceedingly polite. Confrontational, ultimatum-based communication will probably only anger her more at this point. Understand, however, that this is most likely a formality and probably won't procure any results of significance. She'll either politely say that she'll take care of it — only to not do so — or she'll angrily dismiss what you're saying with a "how dare you" tone. Prepare yourself for any reaction, but remember that the important thing is to commence communication politely.
Take a look at the legality of what it is that the bully neighbor is doing. If it's something that isn't quite illegal — like having loud parties that end just before the noise ordinance cut off time — consider going to the neighborhood association and seeing what your options are. If your neighborhood doesn't have one, consider forming one. If the bully knows that everyone on the block is opposed to him and his actions, he may reconsider things. It's one thing if you're his pet project, but it's another if the entire neighborhood is in your corner.
Get a restraining order if you have to. If the bully neighbor's actions cross the line from passive-aggressively annoying to endangering you and your family, talk to the police about your options. If you obtain one, then even the not-quite-illegal things he previously did will now be illegal, as even indirect contact will be forbidden.