What Will Happen to Buyers if the Ritz-Carlton, Paradise Valley Gets Foreclosed?

By Owen Warner. 

For nearly two decades, the Town of Paradise Valley has eagerly awaited the opening of a new project that promised to reinvent the town: the Ritz-Carlton Paradise Valley, also known as “The Palmeraie.” The Palmeraie, first announced in 2007, was pitched as an expansive 122-acre project that would feature a Ritz-Carlton hotel property, Ritz-Carlton branded residences, high-end retail, fine dining, and more. The development began construction in 2018 and was projected to be fully operational by 2024. That, however, proved to be an optimistic estimate. 

A couple of years ago, I had the opportunity to walk the property. While much had been completed, including the skeletal structure of many of the residences, some of the hotel, and the clubhouses, it was very evident that this property would not be ready to “cut the ribbon” and open fully by 2024. Pulling back the curtain on this property, much of what slowed development  was a litany of litigation surrounding the building and lending process. The developer, Five Star Development (“Five Star”), has been involved in many of these lawsuits, some of which involve contractors, suppliers, and builders. Five Star’s inability to comply with timeline requirements led the Town of Paradise Valley to halt permits for completed villas, temporarily stopping $150 million in residential sales and deepening Five Star’s financial deficiencies. 

Now, Five Star faces perhaps its biggest legal challenge yet: foreclosure. In August 2025, the development’s lender, Madison Realty Capital (the “Lender”), filed a Notice of Trustee Sale and scheduled a sale date for November 2025. A Notice of Trustee Sale is the first step in a “non-judicial foreclosure,” wherein a lender can enforce a lien it holds against real property and demand repayment for the loan it extended. If the borrower does not repay the defaulted loan, the lender may proceed with the trustee sale to recoup the funds given to the borrower.

By filing a Notice of Trustee Sale, the Lender effectively told Five Star that it is time to pay up. The Lender extended $585 million for the project and, likely now embroiled in conflict and burdened by delays, wants to pull out of the development. Five Star, or any other interested party, has until the date of the trustee sale in November to file a formal opposition with the Arizona Superior Court and stop the sale. Parties to this foreclosure, as well as those involved in current lawsuits involving the property, are attempting to halt the foreclosure by submitting filings in opposition. 

What about the Homeowners?

The pendency of this trustee sale presents an interesting legal dilemma: what happens to those individuals who are buying into this property? Several individuals who have purchased homes on site have closed escrow and moved into their individual units. However, another group of buyers, whose homes have yet to be completed, remain in escrow and unable to move in due to Five Star’s inability to proceed with construction. In effect, these individuals only possess an executed purchase contract for an incomplete unit within a planned development that now faces foreclosure. These buyers obviously have rights to this property, but what are those rights and how will they be impacted if the foreclosure proceeds?

If the Palmeraie is foreclosed, the homeowners within the resort are somewhat protected by their purchase contracts. Individuals who have executed a purchase agreement acquire equitable title to the property, so buyers may have the right to enforce an implied lien on the property equal to any payment made. That said, the buyers’ rights likely only give them recourse against Five Star and its legal successors, not the Lender. This is because Lender likely has no duty to protect the buyers’ interests.

Given that buyers are only protected by their purchase contracts, their natural question may be: “if the development is foreclosed, will the buyer of the project be obligated to finish the project?” The extent to which the project would be legally required to be completed likely depends on whether the lender’s agreement is secured by a completed project. The lending agreement may contain a “completion guarantee” that protects the lender in the event of non-completion. The terms of the completion guarantee in the lending agreement may provide more details as to the protocol in the event of Five Star’s default or failure to complete. 

If no provisions in the lending contract governed the project’s completion, the Lender could take ownership themselves and contract to have the project finished after the trustee sale. This would seem to be in their best interests, as it would give Lender a higher degree of control over the project’s execution. Alternatively, if the development is sold to another party, the new purchase contract could be another mechanism used to enforce completion. In some cases, the sale of incomplete construction projects feature provisions requiring the project’s completion.

Either way, as is described above, homeowners with purchase contracts for completed units would still have claims against the new builder given their equitable interest in the property. Accordingly, they could at least recover their funds that have already been paid, should the purchaser elect not to proceed with the project. The buyers’ interest provides legal pressure to complete the project, as a failure to do so would subject the new purchasers to liability from every party with an equitable property interest.

While there is no duty for the new purchaser to complete the project, contractual provisions of the sale, coupled with the outstanding equitable interests of those invested in the project and completed units, will likely ensure that the residences are completed.