If the home was built as a single family dwelling, and now there is more than one family living in the building, you will often find issues like that. You have to deal with ALL the utilities, not just the water. There may be a single water meter, a single electrical panel, one natural gas line, and so on.
Obviously it sounds like there may be some family issues to deal with...sounds like your father in law's brother does not have much respect or love towards his nephew. But regardless of that, unless you are sharing the costs each time the water/sewage bill comes due, he does have a point that your family is essentially siphoning off water that he ends up having to pay for.
The first thing I would look into is whether the city or water company can come out and put in a separate meter for your side of the home. It may be as simple as running a pipe from BEFORE the meter from the "brother" side of the building to your side. Or they may choose to do it right and run a completely separate line from the street to your side of the home. (Keep in mind that you only have the one water line coming out, odds are you only have one sewage line going out too, and so who will be responsible if it gets clogged or backs up?)
The same should hold true for the power (separate panel) and gas lines, if any.
Unless you can come to an agreement with the brother where you pay him appropriately for water consumption, I think that's your best option. It will likely cost a few $$$ to fix this, but not sure that there is much choice beyond selling your part of the property and moving out.