Is this when any character teleports there, or a specific one? Do other friendly/neutral NPCs turn hostile in other locations?
Someone else reported something similar, and it turned out to be a previous theft attempt being caught, but not triggering a reaction at the time. As a workaround, they could have that character approach some NPCs (preferably an individual or small group who were not traders or quest related) and escape from combat. After that, the next NPC approached would have a 'hands off' or 'that's not yours' dialogue and a reputation drop, but not trigger combat, and if required you could bribe them into speaking with that character (better to do that with NPCs you will not need to interact with again). In that case, after approaching NPCs in the Arx outskirts, escaping and returning, then heading to the city square, the NPCs there reacted normally to the character, and did not have a reputation drop.
The underlying issue for that has been fixed, and will be included in a future update (no ETA).
