Question! Help. Small claims ??

My husbands dad was doing a rent to own for a house, as seen in the picture he was paying rent for $500 and whatever else he paid on top would go toward the house cost. Now the problem is his dad has been paying the house off for almost 3 years in about 7 months (the house cost is around 40k) and the agreement was that he would have the house paid off in 3 years. My hubby’s dad is wanting to give him the last 5k that is owed to pay off the house now but now the guy is saying that he has to pay the last 3 years of water for the house. When his dad said to the guy that it says on the contract that he didn’t have to pay for water, the guy told him that if he says that he only paid 20k for the house (something so the guy can avoid some taxes or something) that he would only make him pay $50 of water for the last 3 years instead of $100 for the last 3 years. Should he take him to small claims?