The schools now have 40 working days in which to convince the Department for Education and Employment that they can improve without Government intervention.
If the DFEE remains unsatisfied, it can dismiss the current governors and replace them with an education associations to run the schools.
Education associations - popularly known as "hit squads" - have the power to close a school or force it to opt out. Only one association has been created so far, to run Hackney Downs school in the London borough of Hackney.
Earl Marshal, considered to be the most deprived school in Sheffield, and Malory did not fail earlier inspections by teams from the Office for Standards in Education. However, serious weaknesses were identified and after subsequent visits HM Inspectorate has decided that they require special measures.
Three-fifths of the lessons at Earl Marshal were found to be poor or unsatisfactory with significant under-achievement. Pupil attendance varied from unsatisfactory to poor.
At Malory, half the lessons were deemed unsatisfactory or poor and the teachers had difficulty keeping order. While some improvements have been made, the school has not made effective use of the local education authority, says the report, and the pace of change is unacceptably slow.