A license is needed for a commercial project, but free mods can be made even with Skyrim assets.

That's not how it works. If you're interested, Google "copyright law." It states that copyright protects not only the work as a whole but also its individual elements, in this case, models/textures. The fact that the person who stole the materials doesn't make any money from using them is irrelevant. They only, perhaps, "justify" it from some abstract moral point of view.

Take the example of movies and music; you can't take music from a movie and put it into your own amateur film and release it as a "free release." Of course, you can do it. But legally, it's a violation of copyright and piracy. Because people gain access to copyrighted material through your work, for which they should have paid a small fee.

In short, you can be reprimanded for this.
But 99.9999 percent of the time, no one cares. There was one case of a fan remake being canceled; this was, as you can imagine, a potentially very large project and very expensive and serious intellectual property, and the copyright holders finally took action. But even then, there were no fines or lawsuits; people were simply politely told by Disney to "shut down," and they did.

The same applies to models from Heroes of Might and Magic 7 ported to Heroes of Might and Magic 5. No special rules come into play there. This is, whether we like it or not, theft from a legal point of view.

Now, so that I am understood correctly. I am not judging anyone in any way; I don't care at all. I myself have stolen models for mods. I am only very much against people calling black white and denying reality. Whether you like it or not, porting resources from games and using them in mods, even if they are not commercial, is a violation of the law and theft from a legal point of view.
Theoretically, this is punishable. In practice, everyone doesn't care. So much so that quite commercial games are released with stolen resources from other games. There is a lot of this on Google Play and in China.
But the fact that "everyone does it" doesn't make it legal, so don't be misled and don't mislead others.

Added 23 minutes ago

Hmm. Well, the textures may not be original Skyrim textures, but also from mods, like "Better Faces." But you're right, I didn't think about it.

"You can only get away with it cleanly if you use textures and models that are made from scratch. That is, not just reworked resources from the original game, but made from scratch. I'm not sure if there are such mods for Skyrim. But there definitely are for Oblivion.
I think, theoretically, you can contact the authors and ask for permission. Sometimes, authors write in advance that they allow everyone to use and modify their resources, with the condition that the project is not commercial and the original author is mentioned.

Also, in the Grim Age mod for Mount & Blade: Warband, there is a face model made from scratch. This mod currently exists as an OSP, i.e., the author, Furok, gave permission to use the resources on the condition that he is mentioned and the project is non-commercial. The models there, by the way, are simply amazing and are perfect for Heroes of Might and Magic 5. Because it's no secret that Heroes of Might and Magic 5 was "inspired" by Warhammer.


Here is the page with a message from Furok, the third from the top, explaining the situation and linking to the resources. You need a free program to work with BRF files; these are archives from Warband.

But, as I said, if you want to "not steal," if not, then everyone doesn't care in principle; take everything that isn't nailed down.

Or Iclone CC, which I wrote about above, is a good option; it's not more difficult to master than ordinary character editors in modern games. And it seems that it was created for this. From a moral point of view, I don't think this is any worse than pirating this program for a mod or stealing resources from the same Skyrim.