UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                    FORM 10-Q

(Mark one)

[x]                     QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934

                        For the quarterly period ended      September 30, 1998

                                       OR

[ ]                     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934

                        For the transition period from _________to _________

                        Commission File Number               0-17589

                            NTS-PROPERTIES VII, LTD.
             (Exact name of registrant as specified in its charter)

            Florida                                       61-1119232
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

   10172 Linn Station Road
   Louisville, Kentucky                                    40223
(Address of principal executive                          (Zip Code)
offices)

Registrant's telephone number, including area code      (502) 426-4800

                              Not Applicable
           Former name, former address and former fiscal year,
                     if changed since last report

Indicate by check mark whether the registrant (l) 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,  and (2) has been subject to such filing  requirements
for the past 90 days.

                                                          YES  X         NO
Exhibit Index: See page 14
Total Pages: 15


<PAGE>



                                TABLE OF CONTENTS

                                                                          Pages

                                     PART I

Item 1.     Financial Statements

            Balance Sheets and Statement of Partners' Equity
              as of September 30, 1998 and December 31, 1997                  3

            Statements of Operations
              For the three months and nine months ended
                September 30, 1998 and 1997                                   4

            Statements of Cash Flows
              For the three months and nine months ended
                  September 30, 1998 and 1997                         

            Notes To Financial Statements                                   6-7

Item 2.     Management's Discussion and Analysis of Financial
              Condition and Results of Operations                          8-13


                                     PART II

Item 3. Defaults Upon Senior Securities                                      14

Item 6. Exhibits and Reports on Form 8-K                                     14

Signatures                                                                   15



                                      - 2 -

<PAGE>



PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements
<TABLE>

                            NTS-PROPERTIES VII, LTD.

                BALANCE SHEETS AND STATEMENT OF PARTNERS' EQUITY

<CAPTION>


                                                      As of              As of
                                               September 30, 1998  December 31, 1997*
                                               ------------------  -----------------
ASSETS
<S>                                                <C>               <C>        
Cash and equivalents                               $   518,825       $   164,714
Cash and equivalents - restricted                       59,958           176,636
Investment securities                                       --           338,129
Accounts receivable                                      1,593               858
Land, buildings and amenities, net                  10,106,119        10,361,786
Other assets                                           137,093           137,022
                                                   -----------       -----------

                                                   $10,823,588       $11,179,145
                                                   ===========       ===========

LIABILITIES AND PARTNERS' EQUITY

Mortgages payable                                  $ 5,143,957       $ 5,303,947
Accounts payable                                        55,327            38,815
Distributions payable                                   29,078            60,426
Security deposits                                       31,275            36,325
Other liabilities                                       82,315             6,787
                                                   -----------       -----------

                                                     5,341,952         5,446,300

Partners' equity                                     5,481,636         5,732,845
                                                   -----------       -----------

                                                   $10,823,588       $11,179,145
                                                   ===========       ===========
</TABLE>
<TABLE>
<CAPTION>

                                    Limited         General
                                   Partners         Partner           Total
                                   --------         -------           -----
<S>                               <C>             <C>             <C>         
PARTNERS' EQUITY
Capital contributions, net of
 offering costs                   $ 10,935,700    $        100    $ 10,935,800
Net income (loss) - prior years     (2,615,475)        (26,418)     (2,641,893)
Net income - current year                  358               4             362
Cash distributions declared to
 date                               (2,492,377)        (25,176)     (2,517,553)
Repurchase of limited
 partnership Units                    (295,080)             --        (295,080)
                                  ------------    ------------    ------------

Balances at September 30, 1998    $  5,533,126    $    (51,490)   $  5,481,636
                                  ============    ============    ============
<FN>

*   Reference is made to the audited  financial  statements  in the Form 10-K as
    filed with the Commission on March 30, 1998.
</FN>
</TABLE>

                                      - 3 -

<PAGE>
<TABLE>



                            NTS-PROPERTIES VII, LTD.

                            STATEMENTS OF OPERATIONS

<CAPTION>


                                       Three Months Ended        Nine Months Ended
                                         September 30,             September 30,
                                         -------------             -------------
                                      1998         1997         1998         1997
                                   ----------   -----------  ----------   ----------
<S>                                <C>          <C>          <C>          <C>       
REVENUES:
 Rental income                     $  494,661   $  531,525   $1,450,721   $1,518,297
 Interest and other income              7,342        4,887       20,543       14,314
                                   ----------   ----------   ----------   ----------

                                      502,003      536,412    1,471,264    1,532,611

EXPENSES:
Operating expenses                    120,998      122,066      346,890      352,238
Operating expenses - affiliated        67,113       58,780      192,275      173,161
Write-off of unamortized
 land improvements and amenities           --           --       10,743           --
Interest expense                       99,540      110,605      297,781      333,978
Management fees                        25,656       27,398       75,648       78,445
Real estate taxes                      24,875       24,894       75,803       74,682
Professional and administrative
 expenses                              15,032       16,913       46,423       45,829
Professional and administrative
 expenses - affiliated                 20,610       19,931       63,990       60,795
Depreciation and amortization         119,656      128,889      361,349      386,866
                                   ----------   ----------   ----------   ----------

                                      493,480      509,476    1,470,902    1,505,994
                                   ----------   ----------   ----------   ----------

Net income (loss)                  $    8,523   $   26,936   $      362   $   26,617
                                   ==========   ==========   ==========   ==========

Net income (loss) allocated to
 the limited partners              $    8,438   $   26,667   $      358   $   26,351
                                   ==========   ==========   ==========   ==========

Net income (loss) per limited
 partnership unit                  $     0.01   $     0.04   $     0.00   $     0.04
                                   ==========   ==========   ==========   ==========

Weighted average number of units      575,736      598,218      583,606      598,630
                                   ==========   ==========   ==========   ==========
</TABLE>




                                      - 4 -

<PAGE>

<TABLE>


                            NTS-PROPERTIES VII, LTD.

                            STATEMENTS OF CASH FLOWS

<CAPTION>

                                             Three Months Ended       Nine Months Ended
                                               September 30,             September 30,
                                               -------------             -------------
                                            1998          1997        1998          1997
                                          ---------    ---------    ---------    ---------
<S>                                       <C>          <C>          <C>          <C>    
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                         $   8,523    $  26,936    $     362    $  26,617
Adjustments to reconcile net income
 (loss) to net cash provided by
 operating activities:
   Accrued interest on investment
      securities                                 --           --        1,737           --
  Write-off of unamortized land
    improvements and amenities                   --           --       10,743           --
   Depreciation and amortization            119,656      128,889      361,349      386,866
   Changes in assets and liabilities
    Cash and equivalents - restricted        (4,465)     (19,700)     (10,972)     (64,141)
    Accounts receivable                       1,867          895         (735)      12,706
    Other assets                              9,367        9,301        8,887        1,226
    Accounts payable                        (19,700)       9,088       16,512       (6,965)
    Security deposits                          (875)      (1,700)      (5,050)         (60)
    Other liabilities                        24,875       51,130       75,528      100,914
                                          ---------    ---------    ---------    ---------

   Net cash provided by operating
      activities                            139,248      204,839      458,361      457,163
                                          ---------    ---------    ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and
   amenities                                (22,586)      (1,578)    (113,083)      (7,166)
Purchase of investment securities                --      (75,000)    (200,000)     (75,000)
Maturity of investment securities                --           --      536,392           --
                                          ---------    ---------    ---------    ---------

   Net cash provided by (used in)
      investing activities                  (22,586)     (76,578)     223,309      (82,166)
                                          ---------    ---------    ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Cash and equivalents - restricted                --           --      127,650        8,688
Principal payments on mortgages
   payable                                  (53,853)     (41,564)    (159,990)    (122,111)
Cash distributions                          (29,077)     (60,426)    (148,027)    (181,498)
Repurchase of limited partnership
   Units                                         --           --     (134,892)      (8,688)
Payment of loan costs                        (7,128)     (62,442)     (12,300)     (62,442)
                                          ---------    ---------    ---------    ---------

   Net cash used in financing
      activities                            (90,058)    (164,432)    (327,559)    (366,051)
                                          ---------    ---------    ---------    ---------

   Net increase in cash and equivalents      26,604      (36,171)     354,111        8,946

CASH AND EQUIVALENTS, beginning of
   period                                   492,221      323,737      164,714      278,620
                                          ---------    ---------    ---------    ---------

CASH AND EQUIVALENTS, end of period       $ 518,825    $ 287,566    $ 518,825    $ 287,566
                                          =========    =========    =========    =========

Interest paid on a cash basis             $  99,288    $ 110,605    $ 299,432    $ 334,396
                                          =========    =========    =========    =========

</TABLE>




                                      - 5 -

<PAGE>



                            NTS-PROPERTIES VII, LTD.

                          NOTES TO FINANCIAL STATEMENTS

The financial  statements included herein should be read in conjunction with the
Partnership's  1997 Annual Report.  In the opinion of the General  Partner,  all
adjustments (only consisting of normal recurring  accruals) necessary for a fair
presentation  have been made to the  accompanying  financial  statements for the
three months and nine months ended September 30, 1998 and 1997.

1.   Use of Estimates in the Preparation of Financial Statements
     -----------------------------------------------------------

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported amounts of assets and liabilities and
     disclosure  of  contingent  assets  and  liabilities  at  the  date  of the
     financial  statements  and the  reported  amounts of revenues  and expenses
     during the reporting period.
     Actual results could differ from those estimates.

2.   Concentration of Credit Risk
     ----------------------------

     NTS-Properties  VII, Ltd.,  owns and operates,  through a joint venture,  a
     commercial property in Louisville, Kentucky. The sole tenant which occupies
     100% of the property is a business  which has  operations in the Louisville
     area.  The  Partnership  also owns and operates  residential  properties in
     Louisville  and  Lexington,  Kentucky.  The apartment unit is generally the
     principal residence of the tenant.

3.   Cash and Equivalents - Restricted
     ---------------------------------

     Cash and equivalents - restricted represents funds received for residential
     security  deposits,  funds which have been escrowed with mortgage companies
     for  property  taxes in  accordance  with the loan  agreements,  and  funds
     reserved  by the  partnership  for the  repurchase  of limited  partnership
     Units.

4.   Investment Securities
     ---------------------

     Investment securities represent investments in Certificates of Deposit with
     initial maturities of greater than three months. The Partnership intends to
     hold the securities  until maturity.  During 1997 and 1998, the Partnership
     sold no investment  securities.  At September 30, 1998 the Partnership held
     no investment securities with initial maturities greater than three months.

     The following  provides details  regarding the investments held at December
     31, 1997:


                                       Amortized        Maturity     Value at
                   Type                   Cost            Date       Maturity
                  ------                 ------          ------      --------
     Certificate of Deposit           $   112,348       02/04/98    $  112,908
     Certificate of Deposit               100,543       03/05/98       101,492
     Certificate of Deposit               125,238       03/30/98       127,336
                                       ----------                    ---------
                                      $   338,129                   $  341,736
                                       ==========                    =========











                                      - 6 -

<PAGE>



5.   Mortgages Payable
     -----------------

     Mortgages payable consist of the following:


                                              September 30,      December 31,
                                                  1998               1997
                                                  ----               ----
     Mortgage  payable to an insurance  
     company,  bearing interest at a fixed 
     rate of 7.37%, due October 15, 2012,
     secured by land and buildings             $ 4,014,628       $ 4,091,369

     Mortgage payable to an insurance
     company, bearing interest at a fixed
     rate of 8.5%, due November 15, 2005,
     secured by land and building                1,129,329         1,212,578
                                                ----------        ----------
                                               $ 5,143,957       $ 5,303,947
                                                ==========        ==========


     Based on the borrowing  rates  currently  available to the  Partnership for
     mortgages  with  similar  terms and average  maturities,  the fair value of
     long-term debt is approximately $6,200,000.

6.   Interest Repurchase Reserve
     ---------------------------

     Pursuant  to  Section  16.4  of  the  Partnership's  Amended  and  Restated
     Agreement  of Limited  Partnership,  the  Partnership  has  established  an
     Interest  Repurchase  Reserve.  On May 26, 1998, the Partnership elected to
     fund $6,000 to its  Interest  Repurchase  Reserve and on June 2, 1998,  the
     Partnership  funded  an  additional  $1,242  to  the  reserve.  With  these
     fundings,  the  Partnership  repurchased  1,207  Units at a price of $6 per
     Unit.  From  December  1995 to September  30,  1998,  the  Partnership  has
     repurchased a total of 62,529 Units for $295,080.  The above offering price
     per Unit was  established by the General Partner in its sole discretion and
     does not purport to represent the fair market value or liquidation value of
     the Units.  Repurchased  Units will be  retired  by the  Partnership,  thus
     increasing the percentage of ownership of each  remaining  limited  partner
     investor.  The Interest  Repurchase  Reserve was funded from cash reserves.
     The balance in the reserve at September 30, 1998 was $3.

7.   Related Party Transactions
     --------------------------

     Property   management  fees  of  $75,648  and  $78,445  were  paid  to  NTS
     Development  Company, an affiliate of the General Partner,  during the nine
     months ended  September  30, 1998 and 1997,  respectively.  The fee is paid
     monthly in an amount equal to 5% of the gross revenues from the residential
     properties  and 6% of the  gross  revenues  from  the  commercial  property
     pursuant to an agreement with the  Partnership.  The  Partnership  also was
     charged the  following  amounts from NTS  Development  Company for the nine
     months ended September 30, 1998 and 1997. These charges include items which
     have been expensed as operating  expenses - affiliated or professional  and
     administrative  expenses - affiliated and items which have been capitalized
     as other assets or as land, buildings and amenities.


                                          1998       1997
                                        --------   --------

                     Leasing            $ 36,098   $ 30,044
                     Administrative       81,786     80,049
                     Property manager    144,766    122,775
                     Other                 1,137      1,088
                                        --------   --------

                                        $263,787   $233,956
                                        ========   ========




                                      - 7 -

<PAGE>



Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
------- -----------------------------------------------------------------------
        OF OPERATIONS
        -------------

The management's  discussion and analysis of financial  condition and results of
operations  included herein should be read in conjunction with the Partnership's
1997 Annual Report.

Results of Operations
---------------------

The occupancy levels at the Partnership's  properties as of September 30 were as
follows:


                                                 1998                 1997
                                                 ----                 ----

Wholly-owned Properties
-----------------------

The Park at the Willows                           88%                  94%

Park Place Apartments Phase II                    86%                  95%

Property Owned in Joint Venture with
NTS-Properties IV and NTS-Properties
Plus Ltd. (Ownership % at September
30, 1998)
-----------------------------------

Blankenbaker Business Center 1A (31%)            100%                 100%

Rental and other income generated by the Partnership's  properties for the three
months and nine months ended September 30, 1998 and 1997 was as follows:


                                       Three Months Ended    Nine Months Ended
                                         September 30,         September 30,
                                         -------------         -------------
                                         1998      1997       1998       1997
                                        ------    ------     ------     ------
Wholly-owned Properties

The Park at the Willows               $  93,809 $  88,877  $ 276,832  $  243,812

Park Place Apartments Phase II        $ 329,747 $ 369,994  $ 961,845  $1,057,099

Property owned in Joint Venture
with NTS-Properties IV and NTS-
Properties Plus Ltd. (Ownership %
at September 30, 1998)

Blankenbaker Business Center 1A        $ 74,564 $  73,478  $ 218,093  $  220,461
(31%)(1)

(1)    Revenues  shown  in this  table  represent  the  Partnership's  share  of
       revenues generated by Blankenbaker  Business Center 1A. The Partnership's
       percentage  interest in the joint  venture was 31% during the nine months
       ended September 30, 1998 and 1997.

The Park at the Willows'  occupancy  decreased from 94% at September 30, 1997 to
88% at September  30, 1998.  Average  occupancy  for the nine month period ended
September 30 increased  from 90% in 1997 to 91% in 1998.  Average  occupancy for
the three month period ended  September 30 decreased  from 94% in 1997 to 90% in
1998.  Occupancy at  residential  properties  fluctuates on a continuous  basis.
Period ending occupancy percentages represent occupancy only on a specific date;
therefore,  it is more meaningful to look at average occupancy percentages which
are more  representative  of the  entire  period's  results.  Large  changes  in
occupancy  at The Park at the  Willows  are due to the fact that the complex has
only 48 units.  One vacant apartment in this complex equates to a 2% decrease in
occupancy;  therefore,  occupancy  percentage  changes may appear distorted on a
percentage basis when compared to other residential properties. In residential

                                      - 8 -

<PAGE>



Results of Operations - Continued
---------------------------------

properties it is not uncommon for multiple residents to vacate at month-end with
new residents  taking  occupancy within a few days. When this occurs at The Park
at the  Willows,  the change in  occupancy  will be much  greater  than at other
residential  properties  because of its small size.  The  increase in rental and
other income at The Park at the Willows for the three months and the nine months
ended  September  30, 1998 as compared to the same  periods in 1997 is due to an
increase  in income  from  fully  furnished  units.  Fully  furnished  units are
apartments which rent at an additional premium above base rent. Therefore, it is
possible for  occupancy to decrease and revenues to increase  when the number of
fully-furnished  units occupied has increased.  The increase in rental and other
income for the nine  month  period is also a result of the  increase  in average
occupancy.

Park Place Apartments  Phase II's occupancy  decreased from 95% at September 30,
1997 to 86% at September 30, 1998.  Average  occupancy for the nine month period
ended September 30 at Park Place  Apartments Phase II decreased from 92% in 1997
to 84% in 1998.  Average occupancy for the three month period ended September 30
decreased from 96% in 1997 to 85% in 1998. In the opinion of the General Partner
of the Partnership,  the decrease in occupancy at Park Place Apartments Phase II
is only a temporary  fluctuation  and does not  represent  a downward  occupancy
trend.  Rental and other income at Park Place  Apartments Phase II decreased for
the three months and the nine months ended September 30, 1998 as compared to the
same periods in 1997 as a result of the decrease in average occupancy.

Sykes  HealthPlan  Service Bureau,  Inc.  (formerly known as Prudential  Service
Bureau,  Inc.) has leased 100% of  Blankenbaker  Business Center 1A through July
2005.  In addition to monthly  rent  payments,  Sykes  Service  Bureau,  Inc. is
obligated to pay substantially all of the operating expenses attributable to its
space. Blankenbaker Business Center 1A's rental and other income remained fairly
constant  for the three  months and nine  months  ended  September  30,  1998 as
compared to the same periods in 1997.

If present  trends  continue,  the  Partnership  will be able to continue at its
current  level  of  operations  without  the need of any  additional  financing.
Current  occupancy  levels are considered  adequate to continue the operation of
the Partnership's properties. See the Liquidity and Capital Resources section of
Item 2 for a discussion  regarding the cash  requirements  of the  Partnership's
current debt financings.

Interest and other income includes  interest income from short-term  investments
made by the Partnership with cash reserves.  The increase in interest income for
the three  months and nine months  ended  September  30, 1998 as compared to the
same periods in 1997 is a result of increased cash reserves being  available for
investment.

Operating expenses for the three months and nine months ended September 30, 1998
as compared to the same periods in 1997 remained fairly constant.

Operating  expenses -  affiliated  increased  for the three  months and the nine
months  ended  September  30, 1998 as compared to the same  periods in 1997 as a
result of increased property  management costs.  Operating expenses - affiliated
are expenses  incurred for  services  performed by employees of NTS  Development
Company, an affiliate of the General Partner.

The write-off of unamortized  land  improvements and amenities can be attributed
to Park Place  Apartments  Phase II.  The  write-off  is the result of  property
renovations.  The write-off represents the cost of unamortized assets which were
replaced as a result of the renovations.

The decrease in interest  expense for the three months and the nine months ended
September  30, 1998 as  compared to the same  periods in 1997 is the result of a
lower  interest  rate on the new debt  obligation  obtained  October 1997 (7.37%
versus  8.375%)  and a result of the  Partnership's  decreasing  debt level as a
result of principal  payments  made.  See the  Liquidity  and Capital  Resources
section of this item for details regarding the Partnership's debt.



                                      - 9 -

<PAGE>



Results of Operations - Continued
---------------------------------

Management  fees are  calculated as a percentage of cash  collections;  however,
revenue  for  reporting  purposes  is on the  accrual  basis.  As a result,  the
fluctuations of revenues  between  periods will differ from the  fluctuations of
management fee expense.

Real estate taxes, professional and administrative expenses and professional and
administrative  expenses -  affiliated  remained  fairly  constant for the three
month and nine month  periods  ended  September 30, 1998 as compared to the same
periods in 1997.  Professional  and  administrative  expenses -  affiliated  are
expenses  incurred  for  services  performed  by  employees  of NTS  Development
Company, an affiliate of the General Partner.

Depreciation  and  amortization  decreased  for the three months and nine months
ended  September 30, 1998 as compared to the same periods in 1997 as a result of
a portion of the assets with shorter lives at Park Place Apartments Phase II and
Blankenbaker  Business  Center 1A becoming fully  depreciated.  Depreciation  is
computed using the  straight-line  method over the estimated useful lives of the
assets which are 10 - 30 years for land improvements,  30 years for buildings, 5
- 30 years  for  building  improvements  and 5 - 30  years  for  amenities.  The
aggregate  cost of the  Partnership's  properties  for Federal  tax  purposes is
approximately $13,700,000.

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

Cash provided by operations  was $458,361 and $457,163 for the nine months ended
September 30, 1998 and 1997, respectively.  These funds in conjunction with cash
on hand were used to make a 1.3%  (annualized)  cash  distribution  of  $116,680
(1998)  and  a  2%  (annualized)  cash  distribution  of  $181,279  (1997).  The
annualized  distribution rate is calculated as a percent of the original capital
contribution. The limited partners received 99% and the General Partner received
1%  of  these  distributions.   The  primary  source  of  future  liquidity  and
distributions is expected to be derived from cash generated by the Partnership's
properties  after adequate cash reserves are  established for future leasing and
tenant finish costs.  It is anticipated  that the cash flow from  operations and
cash  reserves will be  sufficient  to meet the needs of the  Partnership.  Cash
reserves (which are unrestricted cash and equivalents and investment  securities
as shown on the  Partnership's  balance  sheet as of September 30) were $518,825
and $362,566 at September 30, 1998 and 1997, respectively.

As of  September  30,  1998,  the  Partnership  had a mortgage  payable  with an
insurance company in the amount of $4,014,286.  The mortgage bears interest at a
fixed  rate of 7.37%,  matures  October  15,  2012 and is  secured  by the land,
buildings  and  amenities of Park Place  Apartments  Phase II.  Current  monthly
payments  are  based  upon a 19-year  amortization.  The  outstanding  principal
balance  at  maturity  based  on  the  current  rate  of  amortization  will  be
$1,414,978.

As of September 30, 1998,  Blankenbaker  Business Center Joint Venture, in which
the Partnership  has a joint venture  interest,  had a mortgage  payable with an
insurance  company in the amount of  $3,603,474.  The  mortgage is recorded as a
liability  of the  Joint  Venture  and is  secured  by the  assets  of the Joint
Venture. The Partnership's  proportionate  interest in the mortgage at September
30, 1998 is $1,129,329.  The mortgage bears interest at a fixed rate of 8.5% and
is due November 15, 2005.  Current monthly principal  payments are based upon an
11-year amortization  schedule. At maturity,  the mortgage will have been repaid
based on the current rate of amortization.








                                     - 10 -

<PAGE>



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

Pursuant to Section 16.4 of the Partnership's  Amended and Restated Agreement of
Limited  Partnership,  the Partnership  has  established an Interest  Repurchase
Reserve. On May 26, 1998, the Partnership elected to fund $6,000 to its Interest
Repurchase  Reserve and on June 2, 1998,  the  Partnership  funded an additional
$1,242 to the reserve.  With these fundings,  the Partnership  repurchased 1,207
Units at a price of $6 per Unit.  From December 1995 to September 30, 1998,  the
Partnership  has  repurchased  a total of 62,529 Units for  $295,080.  The above
offering  price per Unit was  established  by the  General  Partner  in its sole
discretion  and  does  not  purport  to  represent  the  fair  market  value  or
liquidation  value  of the  Units.  Repurchased  Units  will be  retired  by the
Partnership,  thus  increasing  the  percentage  of ownership of each  remaining
limited partner investor.  The Interest  Repurchase Reserve was funded from cash
reserves. The balance in the reserve at September 30, 1998 was $3.

The  majority  of  the  Partnership's   cash  flow  is  derived  from  operating
activities. Cash flows used in investing activities are for capital improvements
at the Partnership's properties. These improvements are funded by cash flow from
operations. Cash flows used in investing activities are also for the purchase of
investment  securities.   As  part  of  its  cash  management  activities,   the
Partnership  has purchased  Certificates  of Deposit with initial  maturities of
greater  than three  months to  improve  the  return on its cash  reserves.  The
Partnership held the securities until maturity. Cash flows provided by investing
activities  are a result of the maturity of these  investment  securities.  Cash
flows  used in  financing  activities  are  for  cash  distributions,  principal
payments  on  mortgages   payable,   loan  costs,  and  repurchases  of  limited
partnership  Units. Cash flows provided by financing  activities  represents the
utilization  of  cash  which  has  been  reserved  by the  Partnership  for  the
repurchase of limited  partnership  Units.  The Partnership  does not expect any
material changes in the mix and relative cost of capital resources from those in
1997.

During the next twelve months,  the  Partnership  anticipates a demand on future
liquidity  as a result  of a planned  renovation  to the  apartment  community's
clubhouse.  At this  time,  the cost and extent of the  renovation  has not been
determined.  The clubhouse is shared with Phase I of the Park Place  development
which was developed and  constructed by  NTS-Properties  VI, an affiliate of the
General  Partner.  The cost to  construct  and operate the common  clubhouse  is
shared proportionately by each phase.

All divisions of NTS, the General Partner of the Partnership,  are reviewing the
effort  necessary to prepare our  information  systems (IT) and  non-information
technology  with embedded  technology  (ET) for the Year 2000.  The  information
technology  solutions have been  addressed  separate for the Year 2000 since the
company saw the need to move to more advanced  management and accounting systems
made available by new technology and software  developments during the decade of
the 1990's.

The PILOT software system,  purchased in the early 1990's, needed to be replaced
by a windows based network system both for our headquarters  functions and other
locations.  The real estate accounting system developed,  sold, and supported by
the Yardi Company of Santa  Barbara,  California  has been selected to supercede
PILOT. The Yardi system is compatible with Year 2000 and beyond.  This system is
being  implemented with the help of third party  consultants and should be fully
operational by the third quarter of 1999. Our system for multi-family  apartment
locations was converted to GEAC's Power Site System  earlier in 1998 and is Year
2000 compliant.

The few remaining  systems not addressed by these conversions are being modified
by our in-house staff of programmers.  The Hewlett Packard 3000 system, used for
PILOT and custom applications, was purchased in 1997 and will be part of our new
network.  It will be retained as long as necessary to assure  smooth  operations
and has been upgrades to meet Year 2000 requirements.


                                     - 11 -

<PAGE>



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

All risks identified with information technology are believed to be addressed by
these plans.

The cost of these advances in our systems  technology is not all attributable to
the Year  2000  issue  since  we had  already  identified  the need to move to a
network  based system  regardless of the Year 2000.  The costs  involved will be
approximately  $45,000  over  1998  and  1999.  These  costs  include  hardware,
software, internal staff and outside consultants.

NTS  property  management  staff has been  surveying  our  vendors  to  evaluate
embedded technology in our alarm systems,  HVAC controls,  telephone systems and
other  computer  associated  facilities.  In a few  cases,  equipment  is  being
replaced. In some cases circuitry is being upgraded.  The cost involved is still
being evaluated. There are no known significant risks that are currently without
solutions.  Management  anticipates that applications  involving ET will be Year
2000 compliant by the third quarter of fiscal year 1999.

We are also currently  addressing the Year 2000 readiness of third parties whose
business interruption could have a material negative impact on our business. All
significant  vendors and tenants have  indicated  that they will be compliant by
the end of 1999. Such assurances are being evaluated and documented.

Management has determined that at our current state of readiness,  the need does
not  presently  exist for a  contingency  plan. We will continue to evaluate the
need for such a plan.

Despite diligent preparation,  unanticipated  third-party failures, more general
public   infrastructure   failures  or  failure  to  successfully  conclude  our
remediation  efforts as planned  could  have a  material  adverse  impact on our
results  of  operations,  financial  conditions  and/or  cash  flows in 1999 and
beyond.

The table below  presents  that portion of the  distributions  that  represent a
return of capital on a Generally  Accepted  Accounting  Principle  basis for the
nine months ended September 30, 1998 and 1997.


                              Net Income             Cash
                                (Loss)           Distributions         Return of
                              Allocated            Declared             Capital
                              ---------            --------             -------

Limited Partners:
       1998                   $    358            $  115,513          $ 115,155
       1997                     26,351               179,466            153,115

General Partner:
       1998                   $      4            $    1,167          $   1,163
       1997                        266                 1,813              1,547


In an effort to continue to improve occupancy at the  Partnership's  residential
properties,  the  Partnership  has an on-site  leasing  staff,  employees of NTS
Development Company, at each of the apartment communities. The staff handles all
on-site visits from potential  tenants,  coordinates  local advertising with NTS
Development  Company's  marketing  staff,  makes  visits to local  companies  to
promote  fully  furnished  units  and  works  with  current  residents  on lease
renewals.

The  lease at  Blankenbaker  Business  Center  1A  provides  for the  tenant  to
contribute toward the payment of common area expenses, insurance and real estate
taxes.  This lease provision,  along with the fact that  residential  leases are
generally for a period of one year, should protect the Partnership's  operations
from the impact of inflation and changing prices.

Some of the statements included in Item 2, Management's  Discussion and Analysis
of  Financial  Condition  and Results of  Operations,  may be  considered  to be
"forward-looking  statements" since such statements relate to matters which have
not yet occurred.  For example,  phrases such as "the Partnership  anticipates",
"believes" or "expects" indicate that it is possible that the event anticipated,
believed or expected may not occur. Should such event not occur, then the result

                                     - 12 -

<PAGE>



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

which  the  Partnership  expected  also may not  occur  or occur in a  different
manner, which may be more or less favorable to the Partnership.  The Partnership
does not  undertake  any  obligations  to  publicly  release  the  result of any
revisions to these  forward-looking  statements  that may be made to reflect any
future events or circumstances.

Any forward-looking  statements included in Management's Discussion and Analysis
of Financial  Condition and Results of Operations,  or elsewhere in this report,
which reflect  management's best judgement based on factors known, involve risks
and uncertainties. Actual results could differ materially from those anticipated
in any forward-looking  statements as a result of a number of factors, including
but not  limited  to those  discussed  below.  Any  forward-looking  information
provided by the  Partnership  pursuant to the safe harbor  established by recent
securities legislation should be evaluated in the context of these factors.

The  Partnership's  principal  activity  is  the  leasing  and  management  of a
commercial  business center and apartment  complexes.  If Sykes, the tenant that
occupies  100% of the business  center,  or a large number of apartment  lessees
default on their lease, the Partnership's ability to make payments due under its
debt agreements, payment of operating costs and other partnership expenses would
be directly  impacted.  A lessee's ability to make payments are subject to risks
generally  associated with real estate,  many of which are beyond the control of
the Partnership,  including general or local economic  conditions,  competition,
interest rates, real estate tax rates, other operating expenses and acts of God.

                                     - 13 -

<PAGE>



PART II.  OTHER INFORMATION

3.  Defaults Upon Senior Securities

       None.

6.     Exhibits and Reports on Form 8-K

       (a)    Exhibits:

              Exhibit 27. Financial Data Schedule

       (b) Reports on Form 8-K:

              None.

Items 1,2,4, and 5 are not applicable and have been omitted.







                                     - 14 -

<PAGE>


                                   SIGNATURES

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


                                      NTS-PROPERTIES VII, LTD.
                                            (Registrant)

                                By:     NTS-Properties Associates VII,
                                        General Partner
                                        By:   NTS Capital Corporation,
                                              General Partner


                                              /s/ Richard L. Good
                                              -------------------
                                              Richard L. Good
                                              President

                                              /s/ Lynda J. Wilbourn
                                              ---------------------
                                              Lynda J. Wilbourn
                                              Vice President
                                              Principal Accounting Officer



Date: November 13, 1998



                                     - 15 -

<PAGE>