The correct option is C That
Option A is the correct answer as ‘that' is a relative pronoun used for things. A relative pronoun is used to connect a clause or phrase to a noun or pronoun. Here, ‘that’ connects the noun ‘flat’ to the clause ‘they bought was very expensive.’ Also, one of the main functions of 'that' is it's used to point out specific things/people/animals.Option B cannot be used as ‘whose’ is the possessive form of ‘who’ and is used when some kind of possession is shown. As this sentence does not talk about people or animals possessing or owning something, ‘whose’ cannot be used here. Option C cannot be used as ‘who’ is the relative pronoun used for people. Option D cannot be used as ‘where’ is used for place.