Lair occupied by second evil spirit (5)
I believe the answer is:
demon
'evil spirit' is the definition.
(I know this)
'lair occupied by second' is the wordplay.
'lair' becomes 'den' (synonyms).
'occupied by' means one lot of letters goes inside another.
'second' becomes 'mo' (both are short periods of time).
'den' placed around 'mo' is 'DEMON'.
(Other definitions for demon that I've seen before include "beast" , "Evildoer" , "ace" , "Wizard" , "Inspiring force" .)