Scottish Natural Heritage, which inherited Edwardian fantasy house Kinloch Castle when it took over Rum, has been accused of letting the 108-year-old building deteriorate.

It is now proposing to sell off surplus property assets to fund an emergency rescue, although the plan has to be approved by the Scottish Government.

The agency hopes to raise up to £2m with a newly set-up Kinloch Castle Trust raising an equivalent amount towards the total £10m cost of the project.

SNH officials will this week meet with one of its Trust partners – Prince Charles' Regeneration Trust, a committed supporter of the sandstone building, to discuss the plan. Other supporters include Griff Rhys Jones, comedian and TV presenter, who featured the castle on his BBC Restoration programme.

A report prepared for the SNH board says the agency has "struggled" to find sufficient funding to keep up with the advancing rate of deterioration of the building.

"A point has been reached where structures and materials are at the end of their lives," it says. "Emergency works valued at approximately £0.5m are required to protect the basic structure and £6m is estimated to be necessary to cover essential repairs.

"If a solution is not found SNH will be faced with the responsibility of owning and managing a category A-listed building in a rapidly advancing state of decline."

The report adds that the Scottish Government is considering a proposal from SNH to allow funds from the sale of surplus agency property to be used by the Castle Trust to allow a phased restoration. "If acceptable, this could allow up to £2m of funding to be awarded to the Trust which would enable it to raise match funding from other public and private sources."

The total cost of restoration and improving the castle's accommodation and educational facilities is estimated at £10.6m.

The PRT is to meet with Environment Minister Michael Russell in September to agree on a way forward. Russell said: "SNH itself admits that it is ill-equipped to be the long-term custodian of Kinloch not least because it is neither funded or suitably skilled to undertake the massive restoration required for a sandstone building, which has had to withstand more than a century of Hebridean weather.

"So what has to happen is the transfer of the castle to an independent body which can implement the exciting plans drawn up the Prince's Regeneration Trust. Tight public finance in Scotland following a poor Westminster spending settlement has not diminished the will within Government to collaborate on the urgent restoration of the castle."

Rhys Jones, who is now president of the Civic Trust in England, said: "SNH is responsible for parts of the castle falling into disrepair and so it is good that it has come up with an imaginative way to get the restoration started. What we now need is the Government to make sure that it happens quickly.

"Kinloch Castle is a wonderful building and it's time its future was secured once and for all."

The Castle was built for Sir George Bullough, a textile tycoon from Lancashire, whose father bought Rum to use as his summer residence.