Assessing the expected structural response of unreinforced masonry (URM) buildings subjected to ground movements is a complex task, due to the highly nonlinear mechanical response of URM and the role played by soil-structure interaction. In the case of historic URM structures, further complexity may be introduced by pre-existing damage and material degradation, which may significantly affect structural capacity. In this study, an advanced, discontinuous numerical formulation, i.e. the Applied Element Method (AEM), is used to predict the structural response of the Consoli Palace — a 14^th Century iconic heritage structure located in Gubbio, Italy — to soil settlements, accounting for pre-existing damage due to both vertical loads and past earthquakes. Specifically, this study focuses on a sub-system of Consoli Palace, which is called Loggia. A micro-modelling strategy is adopted to simulate the masonry bond pattern via rigid blocks and zero-thickness contact interfaces. The complex vaulted floor system of the Loggia is explicitly modelled, incorporating its interaction with the Palace main body. Pre-existing cracks due vertical loading and past earthquakes are implemented in the structural model through specific discontinuities, based on in-situ surveys. Analysis results highlight expected failure modes and damage patterns to potential soil settlements, showcasing how AEM-based micro-modelling can be used to predict the structural behaviour of pre-damaged URM structures.