You are still not telling enough. What transitional arrangements? You should have mentioned all the dates, and full immigration history in details for someone to point you to correct information.
But anyways.
First of all you are living in a cuckoo land to think you can apply without fees. There are no free applications. You can apply for ILR for yourself and any children, and once you have ILR your husband can then apply as your spouse. But even to do that, he will have to pass A1 level english qualification. But as your have mentioned he has failed LiUK test 3rd time, then I think he is pretty useless at these things and won't even manage A1 level test.
LiUK test is a very easy test to pass, if you have even half the brain. Most people I know only prepared for this test for only a few days, and finished and passed the test in less than 10 minutes.
Best way is, that your husband gets his act together and pass the test.
