What is the expected behavior of the VMs residing on that host when a controller...

According to the Nutanix Support & Insights web search result1, if the owner Controller VM becomes unavailable, the address moves to another Controller VM, ensuring that it is always available. This IP address is also used as a cluster-wide address by clients configured as part of Nutanix Files and other products. Therefore, the host will automatically redirect I/O and VMs will continue running without any interruption.