Rarity Property at Nickajack: The Rarity Club development, on 578 acres along Nickajack Lake, west of Chattanooga, faces foreclosure. The land, pictured in 2005, was formerly owned by TVA.
A prominent Knoxville-area developer is facing foreclosure proceedings on a Marion County project located on former TVA land.

A legal notice posted on the Web site of the Marion County News said an auction has been scheduled at 11 a.m. on Aug. 19 for property at Rarity Club, a waterfront project being developed by a firm with ties to Maryville-based Rarity Communities. The notice cited a default on a $15.5 million loan from American Fidelity Bank, now known as GreenBank.

Rarity Communities chief Mike Ross said Friday that Rarity will not contest the foreclosure.

The foreclosure auction covers the entire project except for about 60 lots which were previously sold, Ross said.

The auction will take place at the front entrance of the Marion County Courthouse, in Jasper.

In a press release, Rarity said the economic downturn of the past year and its consequences have "caused many prospective customers within Rarity Communities' key demographic to delay retirement home purchase plans."

The release said the development company for Rarity Club was unable to meet its obligations to a second mortgage lender, which declared its loan to be in default. That step, the release said, created a default on the first mortgage loan and prompted a halt in development work.

Ross added that "we think it is in the best interest for the continued success and development of Rarity Club, given its early stage of development, to accept this resolution so the project can get a fresh start. To further those aims, our companies are willing to offer development and marketing services to whatever entity takes control of the development. Our sincere desire is (that) this project will reach its full potential; one worthy of this rare, special piece of property."

Ross has built a sprawling empire of upscale residential developments throughout East Tennessee, but in recent months several of those projects have been hit by legal woes or financial troubles.

The foreclosure proceedings against Rarity Club mark a milestone in the company's recent travails - in a brief interview, Ross said a foreclosure notice had never been filed on one of his projects before - but the first such action is not necessarily a surprise. Earlier this month, the Chattanooga Times Free Press reported that Ross, in a letter to lot buyers, indicated that the action was imminent.

Rarity Club is located on 578 acres along Nickajack Lake, west of Chattanooga.

In 2005, TVA approved a controversial deal in which Chattanooga developer John "Thunder" Thornton obtained the land in exchange for $2.6 million and 1,100 acres at three nearby sites. According to a lawsuit filed earlier this month in Marion County, Thornton in 2006 sold his interest in a firm that owned the land to Ross and a Rarity entity.

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