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Has he provided any proof as to the "damages"? Also, what did the written lease say about damages?
Does he have any money of yours like from a security deposit?
All right, I think I have most of the basis facts for now. Is there a specific question with which I could assist? I see you asked "what can we do" but that isn't really specific enough to provide an answer that will be helpful to you.
You have a couple of options. You can either wait for him to sue you and then defend the case or you can sue him and ask the court for a "declaratory judgment" as to what, if anything, you owe him.
It's a little harder for him to collect if there were no damages outlined in the original lease. Even though that lease has expired, since you are a "hold over" the judge will likely say that the terms of it apply to your case anyway.
You and he can both sue for your attorney's fees and the judge is likely to award them to whoever wins the case.
If your question has been answered then I'd offer my best wishes to you and ask that you please not forget to leave a Positive Rating so I receive credit for my work. Of course, please feel free to ask any follow up questions in this thread. I want to be sure that all of your questions are answered.