He also questioned why the ministry had asked for the application to be non-notified, which would mean neighbours wouldn't have a say.
Another neighbour, Kylie Moore, said it was a "stupid" idea putting a court in a residential area that was home to young children and elderly people.
Liz Seymour said while she understood the courthouse had to go somewhere, there were plenty of empty properties that were more central and more suitable.
James Devenny, who also lives in Third St, questioned whether someone who wanted to establish a factory or garage on the site would get consent. He expected that would not happen.
The application lodged with Masterton District Council said up to 11 court staff would be based at the school, with 120 people likely to visit the site on court sitting days.
Court would sit about 18 days out of 20, and the facility would be open from 9am to 5pm. The proposal included holding cells.
Justice Ministry acting deputy secretary courts Robert Pigou said while an application had been lodged, other options in Masterton have not been ruled out.
"Our priority has been to get court services back into town and we're grateful to the district council for letting us hold hearings in the Frank Cody Lounge," he said.
"But that was always only a temporary solution and we're now trying to find a venue to provide an interim solution while options are considered for remediation of the Masterton District Court."
Justice ministry spokesman Nathan Green said he could not comment on what other options were being considered as that information was commercially sensitive.
John Heginbotham, a spokesman for Totara Estate, the company that owns the former school site, said the company's directors met yesterday and would make a statement today.
Masterton District Court was closed in 2011, with court hearings since then held at the Masterton Police Station, Carterton Events Centre, and Masterton Town Hall.