You don't say if your friend was originally on the tenancy agreement (while his wife was resident) or ONLY his wife. "Asked to sign over tenancy" implies his name was. Whether The Council can ask (Demand) he moves to a smaller property or not will be listed in the terms of the original tenancy agreement, If no specific right to (if a NEW tenancy has been made) "determine" (end) that agreement then the Council can not ask him to move out. If his name was not on the tenancy (and he has been paying rent) he can demand the last 2 years rent payments back! (Restitution).
Councils and Housing Association are in my opinion based on personal experience always underhand.

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