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Hello and thank you for your question. I will be very pleased to assist you. I'm a practicing lawyer in England with over 10 years experience.
May I confirm that your mother lived in the house until she sadly passed away please?
My mother lived there until approximately 2010 where upon she became to ill to climb the stairs. My sisters daughter then moved into the house.
Thank you. don't I understand the points you make above, it is both quite legal for a third party, in this case your sister, to provide some or all of the capital to assist their parents in purchasing a council house under the right to buy scheme and is in fact fairly common. a typical arrangement might be that one or more children put up the capital of some of the capital to purchase the property on the basis that their parent or parents can live in the property for as long as they wish but after they leave or passed away, the property belongs to the child or children but at the capital. It would under those circumstances be that child or children benefited from the right to buy discount.
typically a trust deed or mortgage would be put in place to secure the child or children's interest in the property as was done here from what you say
under the right to buy scheme there is a requirement that the qualified person entitled to the right by, here your mother, is the legal owner of the property on purchase but there are no other restrictions in terms of how the purchase is funded, be it by family or by a commercial lender.
is there anything above I can clarify for you?
Does the above answer all your questions or is there anything I can clarify or help with any further?