Wow...that is close. It does look to be 5 feet from the fence, though, but not by much, so it would appear that legally you are fine. The problem as I see it might not be the proximity to the fence as much as proximity to the neighbor's windows, etc. I have to be honest and say that If I was a non-chicken owner I'm not sure I'd want that short a distance between my windows and my neighbor's chicken coop. If my chickens are any indication the noise factor will certainly become an issue again as they age. They can be loud, especially early in the morning, and although mine haven't started laying yet I understand there's a joyful, usually loud, "song" sung by the hens after laying an egg. You might be well within your setback requirement but I can actually understand why your neighbor might have some concerns. How many chickens do you have? This one might not be as much a question of legality but rather one of courtesy. I'm sure that's not what you want to hear and I'm sorry about that, but that's how I see it.