UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                      ----------------------------------

                                    FORM 10-Q

    X       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES EXCHANGE ACT OF 1934

               FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996

                                       OR

            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
              SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

                     For the transition period from to .


                        Commission File Number : 0-15037


            PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP
             (Exact name of registrant as specified in its charter)


             Delaware                                       04-2870345
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                           Identification No.)



265 Franklin Street, Boston, Massachusetts                         02110
(Address of principal executive offices)                         (Zip Code)


Registrant's telephone number, including area code  (617) 439-8118


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. Yes X No .



<PAGE>



           PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP

                           CONSOLIDATED BALANCE SHEETS
              December 31, 1996 and September 30, 1996 (Unaudited)
                                 (In thousands)

                                     ASSETS

                                                 December 31    September 30
                                                 -----------    ------------

Operating investment property:
   Land                                           $      698     $     698
   Buildings and improvements                          4,294         4,294
   Equipment and fixtures                                107           107
                                                  ----------     ---------
                                                       5,099         5,099
   Less accumulated depreciation                      (1,684)       (1,651)
                                                  ----------     ---------
                                                       3,415         3,448

Cash and cash equivalents                              5,642         5,067
Escrowed funds                                            14            74
Accounts receivable                                      101           107
Accounts receivable - affiliates                           2             2
Deferred expenses, net                                   117           122
Other assets                                              34            32
                                                  -----------    ---------
                                                  $    9,325     $   8,852
                                                  ==========     =========

                        LIABILITIES AND PARTNERS' DEFICIT

Equity in losses from  unconsolidated 
   joint ventures in excess
   of investments and advances                    $    9,065     $   8,413
Mortgage note payable                                  1,658         1,671
Accounts payable and accrued expenses                     49            61
Accrued interest payable                                  15            15
Accrued real estate taxes                                  -            59
Other liabilities                                          9            10
Partners' deficit                                     (1,471)       (1,377)
                                                  ----------     ---------
                                                  $    9,325     $   8,852
                                                  ==========     =========














                             See accompanying notes.


<PAGE>


           PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP

                      CONSOLIDATED STATEMENTS OF OPERATIONS
        For the three months ended December 31, 1996 and 1995 (Unaudited)
                      (In thousands, except per Unit data)


                                               1996                     1995
                                               ----                     ----

Revenues:
   Rental income and expense recoveries      $    119                $    143
   Interest and other income                       80                      56
                                             --------                ---------
                                                  199                     199
Expenses:
   Mortgage interest                               48                      50
   Property operating expenses                     38                      29
   Depreciation and amortization                   36                      38
   Real estate taxes                               22                      19
   General and administrative                      39                     112
                                             --------                --------
                                                  183                     248
                                             --------                --------
  
Operating income (loss)                            16                     (49)

Partnership's share of unconsolidated
  ventures' losses                               (110)                    (26)
                                             --------                ---------
  

Net loss                                     $    (94)               $    (75)
                                             ========                ========

Net loss per Limited Partnership Unit         $ (2.44)                 $(1.96)
                                              =======                  ======



   The above net loss per  Limited  Partnership  Unit is based  upon the  37,969
Limited Partnership Units outstanding during each period.




















                             See accompanying notes.


<PAGE>


            PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP

             CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
        For the three months ended December 31, 1996 and 1995 (Unaudited)
                                 (In thousands)


                                                   General      Limited
                                                   Partners     Partners
                                                   --------     --------

Balance at September 30, 1995                      $    (752)    $    (221)
Net loss                                                  (1)          (74)
                                                   ---------     ---------
Balance at December 31, 1995                       $    (753)    $    (295)
                                                   =========     =========

Balance at September 30, 1996                      $    (756)    $    (621)
Net loss                                                  (1)          (93)
                                                   ---------     ---------
Balance at December 31, 1996                       $    (757)    $    (714)
                                                   =========     =========


































                             See accompanying notes.


<PAGE>


           PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
        For the three months ended December 31, 1996 and 1995 (Unaudited)
                Increase (Decrease) in Cash and Cash Equivalents
                                 (In thousands)


                                                            1996          1995
                                                            ----          ----
Cash flows from operating activities:
  Net loss                                                 $  (94)     $  (75)
  Adjustments to reconcile net loss to
   net cash provided by (used in) operating activities:
    Depreciation and amortization                              36          38
    Amortization of deferred financing costs                    2           2
    Partnership's share of unconsolidated ventures' losses    110          26
    Changes in assets and liabilities:
      Escrow deposits                                          60          57
      Accounts receivable                                       6         (37)
      Accounts receivable - affiliate                           -          (1)
      Other assets                                             (2)          1
      Accounts payable and accrued expenses                   (12)         (7)
      Accrued real estate taxes                               (59)        (60)
      Other liabilities                                        (1)          -
                                                          -------      ------
        Total adjustments                                     140          19
                                                          -------      ------
        Net cash provided by (used in) 
          operating activities                                 46         (56)
   
Cash flows from investing activities:
   Distributions from unconsolidated joint ventures           542         667

Cash flows from financing activities:
   Principal payments on long-term debt                       (13)        (13)
                                                          -------      ------
Net increase in cash and cash equivalents                     575         598

Cash and cash equivalents, beginning of period              5,067       3,252
                                                          -------      ------

Cash and cash equivalents, end of period                  $ 5,642      $3,850
                                                          =======      ======

Cash paid during the period for interest                  $    46      $   48
                                                          =======      ======











                             See accompanying notes.


<PAGE>


                         PAINE WEBBER INCOME PROPERTIES
                            SEVEN LIMITED PARTNERSHIP
                  Notes to Consolidated Financial Statements
                                   (Unaudited)


1. General

      The accompanying financial statements,  footnotes and discussion should be
   read in conjunction with the financial  statements and footnotes contained in
   the Partnership's Annual Report for the year ended September 30, 1996. In the
   opinion of management,  the accompanying  consolidated  financial statements,
   which have not been  audited,  reflect all  adjustments  necessary to present
   fairly the results for the interim period. All of the accounting  adjustments
   reflected in the accompanying  interim  financial  statements are of a normal
   recurring nature.

      The  accompanying  financial  statements have been prepared on the accrual
   basis  of  accounting  in  accordance  with  generally  accepted   accounting
   principles  which require  management to make estimates and assumptions  that
   affect the reported  amounts of assets and  liabilities  and  disclosures  of
   contingent  assets and  liabilities as of December 31, 1996 and September 30,
   1996 and revenues  and expenses for the three months ended  December 31, 1996
   and 1995.  Actual  results could differ from the  estimates  and  assumptions
   used.

2. Investments in Unconsolidated Joint Venture Partnerships

      The  Partnership  has  investments in four  unconsolidated  joint ventures
   which  own  six  operating  properties,   as  more  fully  described  in  the
   Partnership's Annual Report. The unconsolidated joint venture investments are
   accounted for using the equity method because the Partnership does not have a
   voting control interest in the ventures. Under the equity method, the assets,
   liabilities, revenues and expenses of the joint ventures do not appear in the
   Partnership's  financial statements.  Instead, the investments are carried at
   cost  adjusted  for the  Partnership's  share of the  ventures'  earnings and
   losses and distributions.

      Summarized  operations of the four  unconsolidated  joint ventures for the
   three months ended December 31, 1996 and 1995 are as follows:

                    Condensed Combined Summary of Operations
             For the three months ended December 31, 1996 and 1995
                                 (in thousands)
                                                1996                    1995
                                                ----                    ----

   Rental revenues and expense recoveries      $2,644                  $2,622
   Interest and other income                      100                     103
                                               ------                  ------
                                                2,744                   2,725

   Property operating expenses                    951                     885
   Interest expense                               999                     969
   Real estate taxes                              476                     484
   Depreciation and amortization                  430                     418
                                               ------                  ------
                                                2,856                   2,756
                                               ------                  ------
   Net loss                                    $ (112)                 $  (31)
                                               ======                  ======

   Net loss:
     Partnership's share of combined losses    $ (108)                 $  (24)
     Co-venturers' share of combined losses        (4)                     (7)
                                               ------                  ------
                                               $ (112)                 $  (31)
                                               ======                  ======



<PAGE>


               Reconciliation of Partnership's Share of Operations
              For the three months ended December 31, 1996 and 1995
                                 (in thousands)

                                                1996                    1995
                                                ----                    ----

   Partnership's share of combined
     losses, as shown above                    $ (108)                 $  (24)
   Amortization of excess basis                    (2)                     (2)
                                               ------                  ------
   Partnership's share of
     unconsolidated ventures' losses           $ (110)                 $  (26)
                                               ======                  =======

      As  discussed  further in the Annual  Report,  HMF  Associates  is a joint
   venture  in which  the  Partnership  has an  interest  and which  owns  three
   multi-family  apartment  properties  in the  Seattle,  Washington  area:  the
   Enchanted  Woods  Apartments,  the Hunt Club  Apartments  and the Marine Club
   Apartments.  The  maturity  date of the loan secured by the  Enchanted  Woods
   Apartments  is June 1, 1997,  while the maturity date of the loans secured by
   the Hunt Club and Marina Club  properties  is July 1, 1997, at which time all
   unpaid  principal,  interest and advances are due. At the present  time,  the
   venture's  net  operating  income level is not  sufficient to fully cover the
   interest accruing on the outstanding debt obligations. As a result, the total
   obligation due to the mortgage  lender will continue to increase  through the
   scheduled maturity dates.  Furthermore,  the current aggregate estimated fair
   value of the operating investment  properties is substantially lower than the
   outstanding obligations to the first mortgage holder as of December 31, 1996.
   Accordingly,  it is  unlikely  that the  venture  will be able to  settle  or
   refinance  the debt at the time of the  fiscal  1997  maturities.  The result
   could  be  a  foreclosure  of  the  operating  investment   properties.   The
   Partnership  has a large  negative  carrying  value for its investment in HMF
   Associates  as of December 31, 1996 because  prior year equity  method losses
   and distributions have exceeded the Partnership's investments in the venture.
   Consequently,  the Partnership would recognize a gain upon the foreclosure of
   the operating investment properties.

3. Operating Investment Property

      The Partnership has a controlling interest in one joint venture, West Palm
   Beach Concourse Associates, which owns the Concourse Retail Plaza. The Retail
   Plaza consists of 30,473 net rentable  square feet located in West Palm Beach
   Florida.  Subsequent to a settlement  and  assignment  agreement  executed in
   fiscal  1990,  the  Partnership's   co-venture   partner  is  Seventh  Income
   Properties Fund,  Inc., the Managing General Partner of the Partnership.  The
   amended and  restated  terms of the joint  venture  agreement  are more fully
   described in the  Partnership's  Annual Report.  The Partnership  employs the
   services of a local  unaffiliated  property  management company to administer
   the day-to-day operations of the investment property.

      The  following  is a  summary  of  property  operating  expenses  for  the
   three-month periods ended December 31, 1996 and 1995 (in thousands):

                                                1996                    1995
                                                ----                    ----

      Repairs and maintenance                  $    7                  $    4
      Utilities                                     1                       1
      Insurance                                     2                       1
      Administrative and other                     24                      19
      Management fees                               4                       4
                                               ------                  ------
                                               $   38                  $   29
                                               ======                  ======


<PAGE>


4.    Mortgage Note Payable

      Mortgage note payable on the  consolidated  balance  sheets relates to the
   Partnership's   consolidated   joint  venture,   West  Palm  Beach  Concourse
   Associates, and is secured by the venture's operating investment property. At
   December 31, 1996 and September 30, 1996, mortgage note
   payable consists of the following (in thousands):

                                                   December 31    September 30
                                                   -----------    ------------


     11.12% first  mortgage,  payable in
     installments   of  $20  per  month,
     including interest, through January
     1, 2005. All outstanding  principal
     and  accrued  interest  is  due  on
     January 10, 2005. The fair value of
     this note payable  approximated its
     carrying  value as of December  31,
     1996.                                        $ 1,658           $ 1,671

      In  accordance  with  the  Concourse  mortgage  loan  agreements,  certain
   insurance  premiums  and real estate taxes are required to be held in escrow.
   The balance of escrow deposits on the accompanying balance sheets at December
   31, 1996 and September 30, 1996 consists of such escrowed  insurance premiums
   and real  estate  taxes in the  aggregate  amounts  of $14,000  and  $74,000,
   respectively.

5. Related Party Transactions

      Accounts  receivable - affiliates  at December 31, 1996 and  September 30,
   1996 consist of investor service fees due from the Daniel Meadows Partnership
   of $2,500 and $1,875, respectively.

      Included in general and administrative expenses for the three months ended
   December 31, 1996 and 1995 is $21,000 and $21,000, respectively, representing
   reimbursements  to an affiliate of the Managing General Partner for providing
   certain  financial,  accounting  and investor  communication  services to the
   Partnership.

      Also included in general and administrative  expenses for the three months
   ended  December  31,  1996  and  1995 is  $6,000  and  $5,000,  respectively,
   representing  fees earned by an affiliate,  Mitchell  Hutchins  Institutional
   Investors, Inc., for managing the Partnership's cash assets.

6. Contingencies

      As  discussed  in more  detail in the  Annual  Report  for the year  ended
   September 30, 1996, the Partnership is involved in certain legal actions.  At
   the present time,  the Managing  General  Partner is unable to determine what
   impact,  if any, the resolution of these matter may have on the Partnership's
   financial statements, taken as a whole.


<PAGE>



           PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources
-------------------------------

    As discussed in the Special  Report  mailed to the  Unitholders  in December
1996, due to  improvements  in the  Partnership's  cash flow and the expectation
that it will continue in the future,  the Partnership has reinstated the payment
of regular  quarterly  distributions  at the annual  rate of 2.5% on an original
$1,000  investment.  The first payment of $6.25 per original $1,000 Unit will be
made on February 14, 1997 for the quarter ended  December 31, 1996.  The payment
of quarterly  distributions  was discontinued in early 1990 primarily due to the
lack of cash flow from  several of the  Partnership's  investments.  The plan to
reinstate quarterly distributions is attributable to the improvement in property
operations  and the lower debt service  costs at the Colony  Apartments  and The
Meadows  on  the  Lake  Apartments,  which  represent  a  combined  48%  of  the
Partnership's  original investment  portfolio.  The Partnership will also make a
special  distribution of $40 per original $1,000 investment on February 14, 1997
to  Unitholders  of record on  December  31,  1996.  This  amount  represents  a
distribution of Partnership reserves which exceed expected future requirements.

    The  Partnership  retains  an  interest  in all five of its  original  joint
ventures,  although  the  office  portion  of the  investment  in the  mixed-use
Concourse  property  was  lost  through  foreclosure  proceedings  by the  first
mortgage lender on December 17, 1992. In addition,  as discussed  further below,
the  Partnership  does not  currently  expect to receive any  proceeds  from the
disposition of the three Seattle,  Washington area apartment properties owned by
HMF Associates  because the mortgage debt obligations  secured by the properties
significantly  exceed the estimated  fair market values of the  properties as of
December 31, 1996.  These mortgage debt  obligations  are scheduled to mature in
fiscal  1997,  at which  time all three  operating  properties  could be lost to
foreclosure.  The loss of the Concourse  Office Towers to  foreclosure in fiscal
1993 and the expected loss of the three properties owned by HMF Associates means
that the  Partnership  will be unable to return the full amount of the  original
invested capital to the Limited Partners.  The two office towers represented 28%
of  the  Partnership's  original  investment  portfolio.   The  three  apartment
complexes  owned  by  HMF  Associates  comprise  another  13%  of  the  original
investment  portfolio.  Of the  four  remaining  assets,  the  two  multi-family
properties both have  significant  equity above the outstanding debt obligations
based on estimated  current  property  values,  while the two retail  properties
would not be expected to yield  substantial net proceeds after the mortgage debt
if sold under current market conditions.

    During the first quarter of fiscal 1997, the Partnership  received cash flow
distributions of $184,000 from the Colony  Apartments joint venture and $358,000
from the Meadows joint  venture.  During the third  quarter of fiscal 1996,  the
Meadows  joint  venture  completed  the final  phase of the  repair  work on the
construction  defects at the  property  using the  proceeds  from the  insurance
settlement  originally  escrowed  with the  lender  plus  excess  cash flow from
property  operations.  There was minimal  disruption to the  property's  tenants
during this repair process, and there has been no apparent adverse effect on the
market value of the investment property as a result of this situation. Occupancy
levels remained in the mid-to-high 90% range  throughout the period in which the
repairs were completed, and the property's effective rental rates are comparable
to other apartment  communities in its  sub-market.  With the repair work at The
Meadows on the Lake  Apartments  completed,  the  venture  has begun  generating
regular   distributions  of  excess  cash  flow  to  the   Partnership.   Future
distributions from the Colony Apartments and Meadows joint ventures are expected
to be  sufficient  to fund the  Partnership's  operating  costs,  allow  for the
payment of  quarterly  distributions  to the  Unitholders  and provide  adequate
liquidity to fund the capital  needs which may exist at the other joint  venture
investment  properties.  Assuming  that  the  overall  market  for  multi-family
apartment   properties  remains  strong,  the  Partnership  may  have  favorable
opportunities to sell its interests in the Colony  Apartments and The Meadows on
the Lake  Apartments in the near term. The sales of these two assets,  which, as
discussed above,  represent the Partnership's  sole sources of liquidity,  would
likely  prompt  the  accelerated   dispositions  of  the  remaining   investment
properties. Under such circumstances,  the Partnership could be positioned for a
possible  liquidation  within  the next  2-to-3  years.  However,  there  are no
assurances that the Partnership  will be able to complete the disposition of its
remaining investments within this time frame.

    Occupancy  levels  at the  Concourse  Retail  Plaza  and the  Colony  Square
Shopping Center were 90% and 97%, respectively,  as of December 31, 1996. At the
present time, real estate values for retail shopping  centers in certain markets
are being adversely  impacted by the effects of overbuilding and  consolidations
among  retailers  which have  resulted  in an  oversupply  of space.  It remains
unclear at this time what impact,  if any,  this general  trend will have on the
operations  and/or market values of the  Partnership's  retail properties in the
near term.  Management continues to closely monitor the operating performance of
the  three  restaurant  tenants  at the  Concourse  Retail  Plaza.  Two of these
tenants,  which  occupy  approximately  40% of the  property's  leasable  space,
reported  declining  sales  during  fiscal 1996 and fell behind on their  rental
payments.  Management negotiated agreements with both tenants to cure the rental
delinquencies which, in one of the cases,  involved the forgiveness of a portion
of the  delinquency and a reduction in the future monthly rent payment in return
for an increase  in the term of the lease  obligation.  One of these  tenants is
currently  meeting the modified terms of its rental  obligations.  However,  the
other  tenant,  which  occupies  28% of the  center,  has  continued  to  report
operational  difficulties  and  recently  fell behind on its new rental  payment
arrangement.  The Colony Square  Shopping Center was 97% occupied as of December
31, 1996.  Subsequent  to the quarter end, a lease was signed for the  remaining
1,200 square feet of vacant space, bringing the property to 100% leased. Despite
the positive  leasing  developments,  the Colony Square joint venture still does
not  produce  any  significant  excess  net cash  flow  after  its debt  service
payments.  Upcoming  improvements to the property include the conversion from an
electric heating system to a gas system.

      As  previously  reported,  under  the  terms  of the HMF  Associates  loan
modification   executed  in  fiscal  1992,  all  accrued  and  unpaid   interest
outstanding  as of June 30, 1992 was converted to  principal.  Subject to lender
approval,  the  Partnership  was  entitled to obtain  additional  advances up to
$9,100,000 to fund certain  operating  expenses of the joint venture and to cure
the construction defects in the operating investment  properties.  The loans and
any additional  advances bear interest at a rate of 9% per annum. As of December
31, 1996,  additional lender advances totalling  approximately $4.8 million have
been made,  and the total debt  obligation of the joint venture  totalled  $23.5
million.  Monthly  payments  are made in an amount  equal to the "net  operating
income",  as  defined,  for the prior  month.  Unpaid  interest  is added to the
principal  balance of the  indebtedness on a monthly basis. The maturity date of
the loan secured by the Enchanted  Woods  Apartments is June 1, 1997,  while the
maturity date of the loans  secured by the Hunt Club and Marina Club  properties
is July 1, 1997, at which time all unpaid  principal,  interest and advances are
due. Despite the successful remediation of the properties'  construction defects
and the subsequent  lease-up of the apartment units, the venture's net operating
income  level is not  sufficient  to fully  cover the  interest  accruing on the
outstanding  debt  obligations.  As a result,  the total  obligation  due to the
mortgage lender will continue to increase through the scheduled  maturity dates.
Furthermore,  the current aggregate estimated value of the investment properties
is  substantially  less than the venture's  outstanding  debt  obligations as of
December 31, 1996. Accordingly,  it is unlikely that the venture will be able to
settle or  refinance  the debt at the time of the fiscal  1997  maturities.  The
result  could  be a  foreclosure  of  all  three  of  the  operating  investment
properties.  The  Partnership  has a  large  negative  carrying  value  for  its
investment  in HMF  Associates as of December 31, 1996 because prior year equity
method losses and distributions  have exceeded the Partnership's  investments in
the venture.  Consequently, the Partnership would recognize a gain for both book
and tax purposes upon the foreclosure of the operating investment properties.

      Management has had numerous  discussions  with the mortgage holder for the
properties owned by HMF Associates  regarding a possible loan modification aimed
at preventing the further accumulation of the deferred interest and reducing the
overall  debt  obligation.  Such a plan  would  involve  the  prepayment  of the
existing  mortgage  indebtedness  at a  discount  and  would  require  an equity
infusion by the venture of between  approximately  $1 million and $1.5  million.
Management of the Partnership has evaluated whether an additional  investment of
this  magnitude  in the venture  would be  economically  prudent in light of the
future appreciation  potential of the properties and has concluded that it would
be unwise to commit the  additional  equity  investment  required  to effect the
proposed debt restructuring.  Management  continues to examine alternative value
creation  scenarios,  however,  it appears unlikely at the present time that the
Partnership  will realize any future  proceeds from the ultimate  disposition of
its interests in these three properties.

    At December 31, 1996 the Partnership and its  consolidated  venture had cash
and cash equivalents of approximately $5,642,000. Such cash and cash equivalents
will be utilized as needed for Partnership  requirements  such as the payment of
operating expenses,  distributions to partners,  as discussed further above, and
the funding of operating deficits or capital  improvements of the joint ventures
in accordance with the terms of the respective joint venture agreements,  to the
extent economically justified.  The source of future liquidity and distributions
to the partners is expected to be from  available net cash flow generated by the
operations of the Partnership's investment properties and from net proceeds from
the sale or  refinancing  of such  properties.  Such  sources of  liquidity  are
expected to be sufficient to meet the  Partnership's  needs on both a short-term
and a long-term basis.

Results of Operations
Three Months Ended December 31, 1996
------------------------------------
        The  Partnership  reported  a net loss of $94,000  for the three  months
ended  September  30,  1996,  as  compared to a net loss of $75,000 for the same
period  in the  prior  year.  This  increase  in the  Partnership's  net loss is
attributable to an $84,000 increase in the Partnership's share of unconsolidated
ventures'  losses  which  was  partially  offset  by a  favorable  change in the
Partnership's   operating  income  (loss)  of  $65,000.   The  increase  in  the
Partnership's share of unconsolidated ventures' losses is primarily attributable
to increases in property  operating  expenses  and interest  expense  which were
partially offset by a small improvement in rental revenues.  Property  operating
expenses were higher for the three months ended December 31, 1996 by $66,000 due
to increases at each of the five unconsolidated joint ventures, primarily in the
area of repairs and maintenance  costs.  Interest  expense  increased by $30,000
mainly due to the accumulating  principal  balance on the mortgage loans secured
by  properties  owned by HMF  Associates,  as discussed  further  above.  Rental
revenues  increased by $22,000  primarily  due to an increase in rental rates at
the Colony Apartments for the current  three-month  period. The favorable change
in the  Partnership's  operating  income (loss) is primarily  attributable  to a
decrease  in general and  administrative  expenses.  General and  administrative
expenses decreased by $73,000 primarily due to certain  additional  professional
fees incurred in the first quarter of fiscal 1996.

<PAGE>


                                     PART II
                                Other Information

Item 1. Legal Proceedings

     The status of the litigation  involving the Partnership's  General Partners
and their  affiliates  remains  unchanged  from what was  reported in the Annual
Report on Form 10-K for the year ended September 30, 1996.

Item 2. through 5.  NONE

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits:     NONE

(b)  Reports on Form 8-K:

     No reports on Form 8-K have been filed by the registrant during the quarter
for which this report is filed.


<PAGE>





           PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP


                                   SIGNATURES

      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the  Partnership  has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.


                              PAINE WEBBER INCOME PROPERTIES SEVEN
                                    LIMITED PARTNERSHIP


                              By:  SEVENTH INCOME PROPERTIES FUND, INC.
                                   Managing General Partner




                              By:  /s/ Walter V. Arnold
                                  ---------------------
                                  Walter V. Arnold
                                  Senior Vice President and
                                  Chief Financial Officer


Dated:  February 12, 1997