This puzzle is located in an abandoned villa to the east of the Cyceal city. You will need either telekinesis 3 or the Teleport spell to complete it.
Exit the city through the south-eastern gate and follow the road east until you reach a sign and a dog named Vargo. Now follow the road south to an abandoned villa.
There first room contains several mines, an ooze trap which can be disabled temporary by using a fire spell on it or by placing one of the many nearby crates and barrels on it. There's also a Storage Room Chest and a key to it under one of the crates.
Room to the east is filled with lava which will instantly kill you if you step on it. Carefully enter and rotate the map until you see a chest at the bottom left corner of the room. Using at least telekinesis 3 grab the chest and move it closer so you can open it - this can also be accomplished by targeting it with the Teleport spell and designating a closer point in which to drop the chest.
Now enter the room to the north.
This room contains more containers and mines, a chest and a static cloud trap which can be disabled by placing a nearby barrel on it.
Doorway to the next room contains a hidden switch which activates a fireball trap in the next room. Unchain one of your characters and place him in a doorway. Then move the rest inside and grab the Garden Door Key from a shelf on right side of the room. If you accidentally triggered a fireball trap - there's a disable lever in bottom right corner of this room surrounded by deadly fire traps.
Now open the door to the left, follow down, open a second door and grab the Trap House Chest Key. You need at least telekinesis 2 to do this. There are couple of mines in this room as well.
Come back to the last room and open the Trap House Chest.