Occupy when in costume (7)
I believe the answer is:
inhabit
'occupy' is the definition.
(I know that occupy is a more specific form of the action inhabit)
'in costume' is the wordplay.
'costume' becomes 'habit' (I can't explain this - if you can you should give a lot more credence to this answer).
'in'+'habit'='INHABIT'
'when' acts as a link.
Can you help me to learn more?
(Other definitions for inhabit that I've seen before include "Live in, occupy" , "Occupy (dwelling)" , "Live in (a place)" , "Occupy - settle" , "people" .)