Flats maybe by trail in Cornish town (7)
I believe the answer is:
padstow
'cornish town' is the definition.
(town in Cornwall)
'flats maybe by trail' is the wordplay.
'flats maybe' becomes 'pads' (pad can informally mean an apartment or flat).
'by' says to put letters next to each other.
'trail' becomes 'tow' (both can mean to drag).
'pads'+'tow'='PADSTOW'
'in' is the link.
(Other definitions for padstow that I've seen before include "North Cornish resort with an annual 'Obby 'Oss festival" , "English holiday resort" , "Cornish town" , "Home for Rick Stein" , "Cornish seaside resort" .)