FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

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

                 For the quarterly period ended March 31, 2002
   --------------------------------------------------------------------------

                                       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
                                     0-19140
                     ---------------------------------------


                            CNL Income Fund VII, Ltd.
------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


           Florida                                         59-2963871
--------------------------------                 ------------------------------
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                          Identification No.)


450 South Orange Avenue
Orlando, Florida                                              32801
--------------------------------                 ------------------------------
(Address of principal executive offices)                   (Zip Code)


Registrant's telephone number
(including area code)                                   (407) 540-2000
                                                 ------------------------------


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by  Sections  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>


                                    CONTENTS


                                                                         Page

Part I.

         Item 1.    Financial Statements:

                        Condensed Balance Sheets                          1

                        Condensed Statements of Income                    2

                        Condensed Statements of Partners' Capital         3

                        Condensed Statements of Cash Flows                4

                        Notes to Condensed Financial Statements           5

         Item 2.    Management's Discussion and Analysis of Financial
                        Condition and Results of Operations               6-9

         Item 3.    Quantitative and Qualitative Disclosures About
                        Market Risk                                       9

Part II.

         Other Information                                                10-11




<PAGE>

                            CNL INCOME FUND VII, LTD.
                         (A Florida Limited Partnership)
                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                    March 31,             December 31,
                                                                      2002                    2001
                                                                ------------------     -------------------

 <c>
                               ASSETS

   Land and buildings on operating leases, net                       $ 11,277,461            $ 11,333,419
   Net investment in direct financing leases                            2,427,032               2,452,964
   Investment in joint ventures                                         8,224,060               8,212,208
   Mortgage and other notes receivable                                    104,646                 104,717
   Cash and cash equivalents                                            1,646,204               1,747,363
   Receivables                                                              3,828                  74,097
   Due from related parties                                                 9,824                  12,968
   Accrued rental income, less allowance for doubtful
       accounts of $9,845 in 2001                                       1,055,221               1,058,589
   Other assets                                                            67,519                  76,895
                                                                ------------------     -------------------

                                                                     $ 24,815,795            $ 25,073,220
                                                                ==================     ===================

                  LIABILITIES AND PARTNERS' CAPITAL

   Accounts payable                                                    $    8,051              $   12,306
   Distributions payable                                                  675,000                 675,000
   Due to related parties                                                  19,771                  21,837
   Rents paid in advance and deposits                                          --                  25,716
                                                                ------------------     -------------------
       Total liabilities                                                  702,822                 734,859

   Minority interest                                                      141,042                 141,790

   Partners' capital                                                   23,971,931              24,196,571
                                                                ------------------     -------------------

                                                                     $ 24,815,795            $ 25,073,220
                                                                ==================     ===================
</TABLE>

           See accompanying notes to condensed financial statements.

<PAGE>


                            CNL INCOME FUND VII, LTD.
                         (A Florida Limited Partnership)
                         CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>

                                                                          Quarter Ended
                                                                            March 31,
                                                                     2002               2001
                                                                ---------------    ---------------

 <c>
Revenues:
    Rental income from operating leases                              $ 372,389          $ 403,990
    Earned income from direct financing leases                          74,654             77,588
    Interest and other income                                            8,383             58,509
                                                                ---------------    ---------------
                                                                       455,426            540,087
                                                                ---------------    ---------------

Expenses:
    General operating and administrative                                63,040            103,480
    Professional services                                               15,017             12,727
    State and other taxes                                               22,476             31,409
    Depreciation                                                        55,958             63,378
                                                                ---------------    ---------------
                                                                       156,491            210,994
                                                                ---------------    ---------------

Income Before Gain on Sale of Assets, Minority
    Interest in Income of Consolidated Joint Venture
    and Equity in Earnings of Unconsolidated Joint
    Ventures                                                           298,935            329,093

Gain on Sale of Assets                                                      --            122,996

Minority Interest in Income of Consolidated
    Joint Venture                                                       (4,563 )           (4,686 )

Equity in Earnings of Unconsolidated Joint Ventures                    155,988            162,637
                                                                ---------------    ---------------

Net Income                                                           $ 450,360          $ 610,040
                                                                ===============    ===============

Net Income Per Limited Partner Unit                                   $  0.015           $  0.020
                                                                ===============    ===============

Weighted Average Number of Limited Partner
    Units Outstanding                                               30,000,000         30,000,000
                                                                ===============    ===============
</TABLE>
           See accompanying notes to condensed financial statements.

<PAGE>


                            CNL INCOME FUND VII, LTD.
                         (A Florida Limited Partnership)
                    CONDENSED STATEMENTS OF PARTNERS' CAPITAL

<TABLE>
<CAPTION>

                                                                          Quarter Ended           Year Ended
                                                                            March 31,            December 31,
                                                                               2002                  2001
                                                                        -------------------    ------------------

 <c>
General partners:
    Beginning balance                                                           $  230,931            $  230,931
    Net income                                                                          --                    --
                                                                        -------------------    ------------------
                                                                                   230,931               230,931
                                                                        -------------------    ------------------

Limited partners:
    Beginning balance                                                           23,965,640            24,450,070
    Net income                                                                     450,360             2,215,570
    Distributions ($0.023 and $0.090 per
       limited partner unit, respectively)                                        (675,000 )          (2,700,000 )
                                                                        -------------------    ------------------
                                                                                23,741,000            23,965,640
                                                                        -------------------    ------------------

Total partners' capital                                                       $ 23,971,931          $ 24,196,571
                                                                        ===================    ==================
</TABLE>
           See accompanying notes to condensed financial statements.



<PAGE>


                            CNL INCOME FUND VII, LTD.
                         (A Florida Limited Partnership)
                       CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                               Quarter Ended
                                                                                 March 31,
                                                                          2002               2001
                                                                      --------------    ---------------

 <c>
Increase (Decrease) in Cash and Cash Equivalents

    Net Cash Provided by Operating Activities                             $ 655,879          $ 773,042
                                                                      --------------    ---------------

    Cash Flows from Investing Activities:
       Investment in joint venture                                          (76,727 )         (500,018 )
       Decrease in restricted cash                                               --          1,503,682
       Additions to land and buildings on operating
          leases                                                                 --         (1,495,699 )
       Collections on mortgage note receivable                                   --          1,101,865
                                                                      --------------    ---------------
          Net cash (used in) provided by investing activities               (76,727 )          609,830
                                                                      --------------    ---------------

    Cash Flows from Financing Activities:
       Distributions to limited partners                                   (675,000 )         (675,000 )
       Distributions to holder of minority interest                          (5,311 )           (5,035 )
                                                                      --------------    ---------------
          Net cash used in financing activities                            (680,311 )         (680,035 )
                                                                      --------------    ---------------

Net Increase (Decrease) in Cash and Cash Equivalents                       (101,159 )          702,837

Cash and Cash Equivalents at Beginning of Quarter                         1,747,363          1,454,025
                                                                      --------------    ---------------

Cash and Cash Equivalents at End of Quarter                              $1,646,204         $2,156,862
                                                                      ==============    ===============

Supplemental Schedule of Non-Cash Financing
    Activities:

       Distributions declared and unpaid at end of
          Quarter                                                         $ 675,000          $ 675,000
                                                                      ==============    ===============
</TABLE>
           See accompanying notes to condensed financial statements.



<PAGE>

                            CNL INCOME FUND VII, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                     Quarters Ended March 31, 2002 and 2001


1.       Basis of Presentation:
         ---------------------

         The accompanying  unaudited  condensed  financial  statements have been
         prepared in accordance  with the  instructions  to Form 10-Q and do not
         include  all  of the  information  and  note  disclosures  required  by
         generally  accepted  accounting  principles.  The financial  statements
         reflect all adjustments,  consisting of normal  recurring  adjustments,
         which are, in the opinion of management,  necessary to a fair statement
         of the results for the interim periods presented. Operating results for
         the quarter ended March 31, 2002,  may not be indicative of the results
         that may be expected for the year ending December 31, 2002.  Amounts as
         of December 31, 2001, included in the financial  statements,  have been
         derived from audited financial statements as of that date.

         These unaudited financial statements should be read in conjunction with
         the financial statements and notes thereto included in Form 10-K of CNL
         Income Fund VII, Ltd. (the  "Partnership")  for the year ended December
         31, 2001.

         The Partnership accounts for its 83% interest in San Antonio #849 Joint
         Venture using the consolidation  method.  Minority interest  represents
         the minority joint venture partners'  proportionate share of the equity
         in  the  Partnership's  consolidated  joint  venture.  All  significant
         intercompany accounts and transactions have been eliminated.

         Effective  January  1,  2002,  the  Partnership  adopted  Statement  of
         Financial  Accounting  Standards No. 144 "Accounting for the Impairment
         or Disposal of  Long-Lived  Assets."  This  statement  requires  that a
         long-lived  asset be  tested  for  recoverability  whenever  events  or
         changes in  circumstances  indicate that its carrying amount may not be
         recoverable.   The  carrying  amount  of  a  long-lived  asset  is  not
         recoverable  if it  exceeds  the  sum of the  undiscounted  cash  flows
         expected to result from the use and eventual  disposition of the asset.
         The assessment is based on the carrying amount of the asset at the date
         it is tested for recoverability.  An impairment loss is recognized when
         the carrying amount of a long-lived asset exceeds its fair value. If an
         impairment is recognized,  the adjusted carrying amount of a long-lived
         asset is its new cost  basis.  The  statement  also  requires  that the
         results of  operations of a component of an entity that either has been
         disposed  of or is  classified  as  held  for  sale  be  reported  as a
         discontinued   operation  if  the  disposal   activity  was   initiated
         subsequent to the adoption of the Standard.

2.       Reclassification:
         ----------------

         Certain  items in the  prior  years'  financial  statements  have  been
         reclassified to conform to 2002 presentation.  These  reclassifications
         had no effect on total partners' capital or net income.


<PAGE>


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

         CNL Income Fund VII,  Ltd.  (the  "Partnership")  is a Florida  limited
partnership  that was organized on August 18, 1989, to acquire for cash,  either
directly or through joint venture and tenancy in common arrangements, both newly
constructed  and existing  restaurants,  as well as land upon which  restaurants
were to be  constructed  (the  "Properties"),  which  are  leased  primarily  to
operators of national  and  regional  fast-food  restaurant  chains.  The leases
generally are triple-net  leases,  with the lessees  responsible for all repairs
and maintenance,  property taxes, insurance and utilities. As of March 31, 2002,
the Partnership owned 35 Properties, either directly or indirectly through joint
venture or tenancy in common arrangements.

Capital Resources

         The  Partnership  generated cash from  operations  (which includes cash
received from tenants, distributions from joint ventures, and interest and other
income  received,  less cash paid for expenses) of $655,879 and $773,042 for the
quarters ended March 31, 2002 and 2001, respectively.  The decrease in cash from
operations  for the  quarter  ended March 31,  2002,  as compared to the quarter
ended March 31,  2001,  was  primarily a result of changes in the  Partnership's
working capital.

         Other  sources and uses of capital  included the  following  during the
quarter ended March 31, 2002.

         In  August  2001,  the   Partnership   entered  into  a  joint  venture
arrangement,  CNL VII & XV Columbus  Joint  Venture,  with an  affiliate  of the
Partnership  which has the same  general  partners,  to  construct  and hold one
restaurant  Property.  During the quarter ended March 31, 2002, the  Partnership
contributed  approximately  $76,700 to the joint venture to pay for construction
costs.  Construction of the restaurant was completed in February 2002 and, as of
March 31, 2002 the Partnership owned a 68.75% interest in the profits and losses
of the joint venture.

         Currently,  rental income from the  Partnership's  Properties,  any net
sales  proceeds  held by the  Partnership  and any  amounts  collected  from the
promissory  note are  invested in money  market  accounts  or other  short-term,
highly liquid  investments such as demand deposit accounts at commercial  banks,
money  market  accounts  and  certificates  of  deposit  with less than a 90-day
maturity date, pending the Partnership's use of such funds to acquire additional
Properties,  pay Partnership  expenses or to make distributions to the partners.
At March 31, 2002, the  Partnership  had $1,646,204  invested in such short-term
investments,  as compared to  $1,747,363  at December 31, 2001.  The decrease in
cash and cash  equivalents  at March  31,  2002 was  primarily  a result  of the
Partnership  contributing  amounts to pay for construction  costs related to CNL
VII & XV Columbus Joint Venture.  The funds  remaining at March 31, 2002,  after
payment of  distributions  and other  liabilities,  will be used to invest in an
additional Property and to meet the Partnership's working capital needs.



<PAGE>


Short-Term Liquidity

         The Partnership's  short-term liquidity  requirements consist primarily
of the operating expenses of the Partnership.

         The Partnership's  investment strategy of acquiring Properties for cash
and  leasing  them under  triple-net  leases to  operators  who  generally  meet
specified financial  standards  minimizes the Partnership's  operating expenses.
The general partners believe that the leases will continue to generate cash flow
in excess of operating expenses.

         The general  partners have the right,  but not the obligation,  to make
additional capital  contributions if they deem it appropriate in connection with
the operations of the Partnership.

         The Partnership  generally  distributes cash from operations  remaining
after the payment of operating  expenses of the Partnership,  to the extent that
the general partners  determine that such funds are available for  distribution.
Based on current and anticipated  future cash from  operations,  the Partnership
declared  distributions  to the limited  partners  of  $675,000  for each of the
quarters ended March 31, 2002 and 2001. This represents  distributions  for each
applicable quarter of $0.023 per unit. No distributions were made to the general
partners for the quarters ended March 31, 2002 and 2001. No amounts  distributed
to the  limited  partners  for the  quarters  ended  March 31, 2002 and 2001 are
required to be or have been  treated by the  Partnership  as a return of capital
for  purposes of  calculating  the limited  partners'  return on their  adjusted
capital contributions. The Partnership intends to continue to make distributions
of cash available for distribution to the limited partners on a quarterly basis.

         Total liabilities of the Partnership,  including distributions payable,
decreased to $702,822 at March 31, 2002, from $734,859 at December 31, 2001. The
decrease in liabilities was primarily a result of a decrease in accounts payable
and rents paid in  advance  and  deposits  at March 31,  2002,  as  compared  to
December  31,  2001.  The general  partners  believe  that the  Partnership  has
sufficient cash on hand to meet its current working capital needs.

Long-Term Liquidity

         The  Partnership  has no long-term  debt or other  long-term  liquidity
requirements.

Results of Operations

         During the quarters ended March 31, 2001 and 2002, the  Partnership and
its consolidated joint venture, San Antonio #849 Joint Venture, owned and leased
19 wholly owned Properties to operators of fast-food and family-style restaurant
chains.  In connection  therewith,  during the quarters ended March 31, 2002 and
2001, the  Partnership  and San Antonio #849 Joint Venture  earned  $446,065 and
$481,213, respectively, in rental income from operating leases and earned income
from direct financing  leases.  The decrease in rental and earned income for the
quarter  ended March 31, 2002,  as compared to the quarter ended March 31, 2001,
was primarily due to the sales of several of the Partnership's Properties during
2001.  The decrease in rental and earned  income  during the quarter ended March
31, 2002 was partially  offset by the fact that in January 2001, the Partnership
reinvested  a portion of these net sales  proceeds in a Property in Baton Rouge,
Louisiana.

         During the  quarters  ended  March 31, 2002 and 2001,  the  Partnership
earned  $8,383 and  $58,509,  respectively,  in interest and other  income.  The
decrease in interest  and other income  during the quarter  ended March 31, 2002
was  primarily  due  to a  decrease  in  the  average  cash  balance  due to the
reinvestment of sales proceeds in additional Properties during 2001.

         During the  quarters  ended  March 31, 2002 and 2001,  the  Partnership
owned and leased twelve and ten  Properties,  respectively,  indirectly  through
joint venture arrangements, and owned four Properties indirectly with affiliates
of the general  partners as  tenants-in-common  for each of the  quarters  ended
March 31, 2002 and 2001.  In  connection  therewith,  during the quarters  ended
March  31,  2002  and  2001,  the  Partnership  earned  $155,988  and  $162,637,
respectively,  attributable to net income earned by these  unconsolidated  joint
ventures. The decrease in net income earned by joint ventures during the quarter
ended March 31,  2002,  as compared to the  quarter  ended March 31,  2001,  was
primarily due to the fact that the tenant of the Property  owned by Duluth Joint
Venture,  in which the Partnership  owns a 56% interest,  experienced  financial
difficulties  and ceased  making  rental  payments  to the joint  venture.  As a
result,  Duluth Joint  Venture  stopped  recording  rental  revenues  during the
quarter  ended  March 31,  2002.  The  decrease  in net  income  earned by joint
ventures  during the quarter  ended March 31, 2002 was  partially  offset by the
fact that the Partnership invested in two joint venture arrangements,  CNL VII &
XVII Lincoln Joint  Venture and CNL VII, XV Columbus  Joint Venture in April and
August 2001, respectively, with affiliates of the general partners.

         Operating expenses,  including  depreciation expense, were $156,491 and
$210,994  for the  quarters  ended  March 31, 2002 and 2001,  respectively.  The
decrease in  operating  expenses  during the quarter  ended March 31,  2002,  as
compared to the quarter ended March 31, 2001, was partially due to a decrease in
the costs incurred for administrative expenses for servicing the Partnership and
its Properties and due to the Partnership  incurring less  depreciation  expense
during 2002 as a result of the sale of several  Properties in 2001. In addition,
the decrease in operating  expenses during the quarter ended March 31, 2002, was
also partially  attributable to a decrease in the state tax expense  incurred by
the Partnership relating to a state in which the Partnership conducts business.

         In  connection  with  the  sale  of its  Property  in  Florence,  South
Carolina,  in August 1995, the Partnership  recognized a gain of $122,996 during
the quarter  ended March 31,  2001.  The  Partnership  recorded  the sale of the
Property using the installment sales method, in accordance with the Statement of
Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate." As
such,  the  gain  on the  sale  was  deferred,  and  was  recognized  as  income
proportionally  as payments  under the mortgage  note were  collected.  The gain
recognized,  during 2001 was due to the fact that during the quarter ended March
31, 2001, the Partnership collected the outstanding balance of the mortgage note
collaterized by this Property.  No Properties were sold during the quarter ended
March 31, 2002.

         Effective  January  1,  2002,  the  Partnership  adopted  Statement  of
Financial  Accounting  Standards  No.  144  "Accounting  for the  Impairment  or
Disposal of Long-Lived  Assets." This statement requires that a long-lived asset
be tested  for  recoverability  whenever  events  or  changes  in  circumstances
indicate that its carrying amount may not be recoverable. The carrying amount of
a long-lived  asset is not recoverable if it exceeds the sum of the undiscounted
cash flows  expected  to result  from the use and  eventual  disposition  of the
asset.  The assessment is based on the carrying  amount of the asset at the date
it is tested for  recoverability.  An  impairment  loss is  recognized  when the
carrying  amount of a long-lived  asset exceeds its fair value. If an impairment
is recognized,  the adjusted  carrying  amount of a long-lived  asset is its new
cost basis.  The  statement  also  requires  that the results of operations of a
component of an entity that either has been disposed of or is classified as held
for sale be reported as a  discontinued  operation if the disposal  activity was
initiated subsequent to the adoption of the Standard.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         No material  changes in the  Partnership's  market risk  occurred  from
December  31,  2001  through   March  31,  2002.   Information   regarding   the
Partnership's  market risk at December 31, 2001 is included in its Annual Report
on Form 10-K for the year ended December 31, 2001.





<PAGE>


                           PART II. OTHER INFORMATION


Item 1.  Legal Proceedings.   Inapplicable.
         ------------------

Item 2.  Changes in Securities.       Inapplicable.
         --------------------------

Item 3.  Default upon Senior Securities.   Inapplicable.
         -------------------------------

Item 4.  Submission of Matters to a Vote of Security Holders.   Inapplicable.
         ----------------------------------------------------

Item 5.  Other Information.   Inapplicable.
         ------------------

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

         (a)   Exhibits

                 3.1     Affidavit and Certificate of Limited Partnership of CNL
                         Income  Fund VII,  Ltd.  (Included  as  Exhibit  4.1 to
                         Registration  Statement  No.  33-31482 on Form S-11 and
                         incorporated herein by reference.)

                 4.1     Affidavit and Certificate of Limited Partnership of CNL
                         Income  Fund VII,  Ltd.  (Included  as  Exhibit  4.1 to
                         Registration  Statement  No.  33-31482 on Form S-11 and
                         incorporated herein by reference.)

                 4.2     Amended and Restated  Agreement of Limited  Partnership
                         of CNL Income Fund VII,  Ltd.  (Included as Exhibit 4.2
                         to Form 10-K filed  with the  Securities  and  Exchange
                         Commission on April 1, 1996, and incorporated herein by
                         reference.)

                 10.1    Management  Agreement between CNL Income Fund VII, Ltd.
                         and CNL Investment Company (Included as Exhibit 10.1 to
                         Form  10-K  filed  with  the  Securities  and  Exchange
                         Commission on April 1, 1996, and incorporated herein by
                         reference.)

                 10.2    Assignment of Management  Agreement from CNL Investment
                         Company to CNL Income Fund Advisors,  Inc. (Included as
                         Exhibit 10.2 to Form 10-K filed with the Securities and
                         Exchange Commission on March 30, 1995, and incorporated
                         herein by reference.)


<PAGE>



                 10.3    Assignment of Management Agreement from CNL Income Fund
                         Advisors,  Inc. to CNL Fund Advisors, Inc. (Included as
                         Exhibit 10.3 to Form 10-K filed with the Securities and
                         Exchange  Commission on April 1, 1996, and incorporated
                         herein by reference.)

                 10.4    Assignment  of  Management   Agreement  from  CNL  Fund
                         Advisors,  Inc. to CNL APF Partners,  LP.  (Included as
                         Exhibit 10.4 to Form 10-Q filed with the Securities and
                         Exchange   Commission   on   August   10,   2001,   and
                         incorporated herein by reference.)

                 (b)     Reports on Form 8-K

                         No reports on Form 8-K were  filed  during the  quarter
                         ended March 31, 2002.



<PAGE>






                                   SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended,  the  registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

         DATED this 6th day of May, 2002


                                         CNL INCOME FUND VII, LTD.

                                         By: CNL REALTY CORPORATION
                                             General Partner


                                             By: /s/ James M. Seneff, Jr.
                                                 ---------------------------
                                                 JAMES M. SENEFF, JR.
                                                 Chief Executive Officer
                                                 (Principal Executive Officer)


                                             By: /s/ Robert A. Bourne
                                                 ---------------------------
                                                 ROBERT A. BOURNE
                                                 President and Treasurer
                                                 (Principal Financial and
                                                 Accounting Officer)