I purchased my current residence as a cash offer about a year and half ago. It was a fixer that I moved into. Today my neighbor came by while it was raining and told me that he thinks something is wrong with my sewage and that it's making his backyard smell. He beleaves that the people that owned the house before didn't do a good job and wants me to look into it. I didn't really smell anything myself and not sure what to do in this situation. Am I required to do anything? I live in redding ca and any help would very much appreciated. 

do you have a septic system? 

If the poo is going down, then it is not stopped up. If it is stopped up, it can seep to the surface at any point along the way. Where ever it finds the least resistance. It depends on what type of sewer line. How old and the type. It really should not affect the neighbor unless it is really seeping to the surface and you should also be able to see the issue. It should not be under your neighbors yard.

The house is in downtown redding so I know it is connected to the sewer system and not a septic. Not sure what type of sewer system I have. How would I find that out?  I cant see anything coming to the surface I can really smell anything ether. Also anyone know what type of issue my neneghbor could make out of this? I feel way out of my element here and don't want to spend money on a wild goose chase looking for a leak somwear spending money that I don't have lol

Since you are on a sewer,  I can't think of anything that could lead your neighbor to think your sewer is bad. You are focusing on thier conclusion. 

What are the facts of the situation? What are they seeing/hearing/smelling. 

Show them some goodwill and make it seem like you care. 

Raining means a low pressure system holding the smell close to the ground  , your neighbor could be smelling sewage from a number of sources , vent pipes , other neighbors , a sewage spill blocks away , or a neighbor that ate beans and fried eggs .