diff --git a/rhodecode/tests/test_models.py b/rhodecode/tests/test_models.py
--- a/rhodecode/tests/test_models.py
+++ b/rhodecode/tests/test_models.py
@@ -1,2 +1,153 @@
+import os
 import unittest
 from rhodecode.tests import *
+
+from rhodecode.model.repos_group import ReposGroupModel
+from rhodecode.model.repo import RepoModel
+from rhodecode.model.db import Group, User
+from sqlalchemy.exc import IntegrityError
+
+class TestReposGroups(unittest.TestCase):
+
+    def setUp(self):
+        self.g1 = self.__make_group('test1', skip_if_exists=True)
+        self.g2 = self.__make_group('test2', skip_if_exists=True)
+        self.g3 = self.__make_group('test3', skip_if_exists=True)
+
+    def tearDown(self):
+        print 'out'
+
+    def __check_path(self, *path):
+        path = [TESTS_TMP_PATH] + list(path)
+        path = os.path.join(*path)
+        return os.path.isdir(path)
+
+    def _check_folders(self):
+        print os.listdir(TESTS_TMP_PATH)
+
+    def __make_group(self, path, desc='desc', parent_id=None,
+                     skip_if_exists=False):
+
+        gr = Group.get_by_group_name(path)
+        if gr and skip_if_exists:
+            return gr
+
+        form_data = dict(group_name=path,
+                         group_description=desc,
+                         group_parent_id=parent_id)
+        gr = ReposGroupModel().create(form_data)
+        return gr
+
+    def __delete_group(self, id_):
+        ReposGroupModel().delete(id_)
+
+
+    def __update_group(self, id_, path, desc='desc', parent_id=None):
+        form_data = dict(group_name=path,
+                         group_description=desc,
+                         group_parent_id=parent_id)
+
+        gr = ReposGroupModel().update(id_, form_data)
+        return gr
+
+    def test_create_group(self):
+        g = self.__make_group('newGroup')
+        self.assertEqual(g.full_path, 'newGroup')
+
+        self.assertTrue(self.__check_path('newGroup'))
+
+
+    def test_create_same_name_group(self):
+        self.assertRaises(IntegrityError, lambda:self.__make_group('newGroup'))
+
+
+    def test_same_subgroup(self):
+        sg1 = self.__make_group('sub1', parent_id=self.g1.group_id)
+        self.assertEqual(sg1.parent_group, self.g1)
+        self.assertEqual(sg1.full_path, 'test1/sub1')
+        self.assertTrue(self.__check_path('test1', 'sub1'))
+
+        ssg1 = self.__make_group('subsub1', parent_id=sg1.group_id)
+        self.assertEqual(ssg1.parent_group, sg1)
+        self.assertEqual(ssg1.full_path, 'test1/sub1/subsub1')
+        self.assertTrue(self.__check_path('test1', 'sub1', 'subsub1'))
+
+
+    def test_remove_group(self):
+        sg1 = self.__make_group('deleteme')
+        self.__delete_group(sg1.group_id)
+
+        self.assertEqual(Group.get(sg1.group_id), None)
+        self.assertFalse(self.__check_path('deteteme'))
+
+        sg1 = self.__make_group('deleteme', parent_id=self.g1.group_id)
+        self.__delete_group(sg1.group_id)
+
+        self.assertEqual(Group.get(sg1.group_id), None)
+        self.assertFalse(self.__check_path('test1', 'deteteme'))
+
+
+    def test_rename_single_group(self):
+        sg1 = self.__make_group('initial')
+
+        new_sg1 = self.__update_group(sg1.group_id, 'after')
+        self.assertTrue(self.__check_path('after'))
+        self.assertEqual(Group.get_by_group_name('initial'), None)
+
+
+    def test_update_group_parent(self):
+
+        sg1 = self.__make_group('initial', parent_id=self.g1.group_id)
+
+        new_sg1 = self.__update_group(sg1.group_id, 'after', parent_id=self.g1.group_id)
+        self.assertTrue(self.__check_path('test1', 'after'))
+        self.assertEqual(Group.get_by_group_name('test1/initial'), None)
+
+
+        new_sg1 = self.__update_group(sg1.group_id, 'after', parent_id=self.g3.group_id)
+        self.assertTrue(self.__check_path('test3', 'after'))
+        self.assertEqual(Group.get_by_group_name('test3/initial'), None)
+
+
+        new_sg1 = self.__update_group(sg1.group_id, 'hello')
+        self.assertTrue(self.__check_path('hello'))
+
+        self.assertEqual(Group.get_by_group_name('hello'), new_sg1)
+
+
+
+    def test_subgrouping_with_repo(self):
+
+        g1 = self.__make_group('g1')
+        g2 = self.__make_group('g2')
+
+        # create new repo
+        form_data = dict(repo_name='john',
+                         repo_name_full='john',
+                         fork_name=None,
+                         description=None,
+                         repo_group=None,
+                         private=False,
+                         repo_type='hg',
+                         clone_uri=None)
+        cur_user = User.get_by_username(TEST_USER_ADMIN_LOGIN)
+        r = RepoModel().create(form_data, cur_user)
+
+        self.assertEqual(r.repo_name, 'john')
+
+        # put repo into group
+        form_data = form_data
+        form_data['repo_group'] = g1.group_id
+        form_data['perms_new'] = []
+        form_data['perms_updates'] = []
+        RepoModel().update(r.repo_name, form_data)
+        self.assertEqual(r.repo_name, 'g1/john')
+
+
+        self.__update_group(g1.group_id, 'g1', parent_id=g2.group_id)
+        self.assertTrue(self.__check_path('g2', 'g1'))
+
+        # test repo
+        self.assertEqual(r.repo_name, os.path.join('g2', 'g1', r.just_name))
+
+