Crossword Genius

Exclusive circle in small dwelling by lake (7)

Ross

I believe the answer is:

coterie

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'exclusive circle' is the definition.
(I've seen this before)

'small dwelling by lake' is the wordplay.
'small dwelling' becomes 'cot' (I can't justify this - if you can you should give a lot more credence to this answer).
'by' says to put letters next to each other.
'lake' becomes 'erie' (Lake Erie is one of the Canadian/US 'Great Lakes').
'cot'+'erie'='COTERIE'

'in' is the link.

Can you help me to learn more?

(Other definitions for coterie that I've seen before include "In-group" , "Exclusive social circle" , "Exclusive circle of people with common purpose" , "Set" , "Exclusive circle of people, clique" .)

I've seen this clue in The Telegraph.
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