It's a pretty typical family situation. You promised to sell your house, your father-in-law anticipated that you would promptly do so, and now you're expecting him to subsidize your lifestyle indefinitely and he resents it. When you start talking about your "right" to live in his house for eight years without paying him a dime, he probably feels like you set out to trick him at the outset. The "eight years" was your idea, right?

If you want to stop this from growing into a larger problem, start paying him enough rent to keep him happy, or sell your house. After all, the problem isn't the market itself - real estate sells in this market. The problem is that your asking price is too high for this market.

If this went to court, and I were representing your father-in-law, I would try to argue that the lease isn't valid because he gets nothing in return for your staying in the property. (Sorry, but it's pretty typical for tenants to pay their own utility bills.) Also, this "lease" sounds pretty ad hoc. Landlords have duties of maintenance and repair that cannot be waived. So if this is something you wrote yourself, it may not even be in proper form to be binding.