Carol hugs tree that's very wet (7)
I believe the answer is:
soaking
'very wet' is the definition.
(I know that soaking is a more specific form of the attribute very wet)
'carol hugs tree' is the wordplay.
'carol' becomes 'sing' (carol can mean to sing carols).
'hugs' means one lot of letters goes inside another.
'tree' becomes 'oak' (oak is a type of tree).
'sing' placed around 'oak' is 'SOAKING'.
'that's' acts as a link.
(Other definitions for soaking that I've seen before include "Wet" , "Drenched" .)