Penalises London area for elegance (7)
I believe the answer is:
finesse
'for elegance' is the definition.
(thesaurus)
'penalises london area' is the wordplay.
'penalises' becomes 'fines'.
'london area' becomes 'SE' (abbreviation for South East).
'fines'+'se'='FINESSE'
(Other definitions for finesse that I've seen before include "Artifice" , "isky card play" , "Delicate handling of a situation" , "Subtle elegance" , "Hopeful ploy at cards" .)