Engineering firm Jarvis is to back out of its controversial £105 million schools contract.

A new company, the Secondary Market Infrastructure Fund (SMIF), will take over the refurbishment and maintenance of Dorothy Stringer, Varndean and Patcham high schools in Brighton this week.

Jarvis has been forced to sell its private finance initiative (PFI) contracts across the country following interim losses of more than £283 million. SMIF today pledged to transform the way the schools were run.

Senior council and school figures said they would not be sorry to see Jarvis go.

Since the agreement to turn over the management of the three schools was signed in 2002 it has been beset by problems.

The governors of Varndean blamed Jarvis in their annual report of 2003 for delayed term openings, rooms without equipment and a lack of cleaning and other day-to-day maintenance.

Jill Clough, head of Comart, which was originally included in the contract, quit due to stress.

The school then closed in September after pupil number predictions by the council proved over-optimistic, leaving the authority owing up to £3 million in penalty fees to Jarvis.

Reg Hook, chairman of governors at Dorothy Stringer was dismissed by the council last November following conflicts over the PFI contract.

SMIF chief executive Bill Doughty said: "It is unprecedented with PFI to see the situation Jarvis is in.

"Its very serious financial difficulties have affected its ability to deliver services.

"We are in an excellent financial position and will able to turn around the running of the schools.

"Our objective is to end the uncertainty the schools have suffered."

Varndean head Andy Schofield said: "We are not expecting magic straight away.

"But to be honest, things couldn't get any worse than they are now."

Varndean pays £28,000 a month for cleaning and maintenance but said the work was not being done at the height of the problems in 2003.

Mr Schofield said: "Conversely, we have to fight for every penny we want to spend.

"I am cautiously welcoming the change and hoping the new financiers will actually take an interest in how the contract is being delivered."

Under PFI, private consortiums, usually involving large construction firms, are contracted to design and build new projects and also to manage them.

Unions claim one of the main ways private companies profit from the PFI is by staffing buildings as cheaply as possible.

But supporters say PFI is the only way of improving or replacing public buildings without squeezing public finances further.

Council finance spokesman Simon Burgess said: "I won't shed a tear to see Jarvis go.

"I hope the new company will take a closer interest in how it follows through on its obligations."

Varndean governors say the council is equally to blame for the school's difficulties.

Their last annual report said the attitude of the council had "hit rock bottom" last year as it hosted unproductive meetings and failed to put pressure on Jarvis to carry out its duties properly.

David Hawker, the council's head of education, said: "We haven't heard from the Audit Commission and the meetings I personally hosted last year did result in some very significant improvements in Jarvis' performance.

"I intervened personally to convene those meetings because I was concerned at the poor performance of Jarvis and we were getting a large number of complaints from the schools.

"I called the managing director of Jarvis to a meeting with us and all four schools to address that issue and their performance did improve as a result."

Jarvis declined to comment.