The sheriff just followed me to Lawenilothehl after asking me to kill Hotz, and then promptly died before Hotz did. Killing Hotz and his guards then gave dropped me from N+ to CN, defending myself from shriek and some hostile beggars dropped my alignment further. I always thought that attacking Hotz was a chaotic act and killing him was a lawful one, or does the +alignment come as the quest reward?
EDIT: it made sense to post that here before I typed it out, but now I'm not so sure. Although I suppose it wouldn't hurt to warn people against letting the sheriff follow you when you set off to kill Hotz.