This is not an easy question to answer. There are good arguments to be made on both sides. I would also like to know if he is suing you in a landlord-tenant non-payment proceeding (as a "petitioner") or in small claims, city court or justice court (as "plaintiff"), because that will make a huge difference jurisdictionally. The landlord cannot sue you in a landlord-tenant eviction style proceeding because you do not occupy the premises.

The landlord's argument is something called anticipatory repudiation. That means that under circumstances where it is clear you cannot perform under a contract, he can treat the contract as breached and sue for damages. The problem with that is he first has to demand performance and he has not given you that chance.

I like your position better, which is that his refusal to permit you an opportunity to perform under the contract (lease) was a breach of the implied covenant of good faith and fair dealing in contracts. When the landlord said you would be responsible under the lease, you tried to move in and perform (i.e., pay rent) and he prevented you from obtaining the consideration (benefit) you were entitled to receive under the contract (i.e., the apartment).

It is very clear that once the landlord found out you would have trouble affording the rent, he recognized that if you took occupancy, he would have to wait until you missed a rent payment, then serve a 3-day demand for rent, then bring an eviction proceeding. Clearly not wanting to go through the hassle and to hire a lawyer for that, he simply prevented you from taking occupancy in the first place.

I would say you are not liable because the landlord breached the contract himself by denying you possession of the apartment. Under that set of facts, you are entitled to treat the contract has having been terminated. I would demand the security deposit back in a counterclaim.

Finally, I can see an argument that the landlord, in reliance on your promise to move in and pay rent, gave up the opportunity to rent the apartment to somebody else. It is not a strong argument, but still he changed his position in reliance on that representation. This type of argument is usually made to claim there was a contract when the formalities of a contract don't exist. However, it cannot be used in place of a contract (i.e., the lease). His remedy was to enforce the contract. He tried to hold you to the contract, but not himself. He cannot do that.

Please note that there may be other facts and circumstances that would change this opinion and your best course of action would be to consult with a lawyer who can ask you relevant questions and get the full picture. Best of luck.