Sure, you can sue; but who are you going to sue? You have to prove someone knew about the fact that one condo resident was going to be paying for the other condo's hot water.
Mixed up plumbing and electrical systems are fairly common in apartment and condo complexes, especially ones that have been converted. Chances are high it's a mistake and was not done on purpose.
If you can find the original general contractor, he's going to say it wasn't him, talk to the plumbing contractor. Who will say I didn't do it, and my work is only guaranteed for five years, so talk to the plumbing inspector. He'll say he didn't see it, and besides, all those inspection records were thrown out ten years ago. The condo association may or may not have had oversight of the construction. Can you prove the neighbor knew about it and didn't tell the condo association? Can you prove the realtor who your dad bought through knew about it? Was there a home/condo inspection done - paid for by your dad or the seller - before the sale that might have spotted it?
The police aren't going to care; technically, it is a crime, in a way, but it's not like someone tapped into someone's cable TV or electrical power meter last week. This is a problem from years ago, more than likely from the original construction; so who is really responsible? The police aren't going to run that down.
And, what are the damages? A few months of part of a power bill? Is it really worth a lawsuit and a lawyer? Against who? I can't see a lawyer jumping into it.
If you want to do something for whatever comes next, yes, collect evidence. Tell the neighbor he/she's on your hot water. Take photos and get a licensed plumber to take a look at it and give you an estimate for separating the water systems. That will document that the two systems are not separate. (Either call your own plumber or ask the condo association for the name of someone).
Then, start with the condo association. They may be responsible for the inspections before the sale. At very least, the condo association may have to check off on the repairs. And, they may know more about it (oh, yes, we've heard about that in a few other condos...) You could bring it to everyone's attention at a meeting; it may be a common issue in the complex, and other residents may not know about it.
If, in fact, the neighbor doesn't have their own water heater, they may be more on the hook for expensive repairs than your dad. They may have more of a case against the condo association than your dad.
