Your playgroup probably hasn't implemented the emergent rule that free actions can only be taken on one's turn
So, most playgroups play with this rule where free actions can only be done on your turn. That's not explicitly stated anywhere, but there are some general passages that seem to sort-of imply it and Wizards of the Coast, the publishing company, said in an old blog post I can no longer find but which is referenced here both that free actions should not be allowed off-turn and that the implication of the general introduction to actions that all actions, including free action, happen only during your turn was, in fact, intended.
However, many groups exist that are unaware of this weird once-posted-about-in-a-blog-but-never-errataed pseudo-rule and, especially if the game sticks pretty close to the core material, allowing free actions off-turn is rarely a problem.
One immediately visible consequence of allowing off-turn free actions is off-turn 5' steps. If a character does not otherwise move any actual distance and isn't in difficult terrain, they can take a 5-foot step without provoking an attack of opportunity, pretty much whenever. How this works out in gameplay is pretty much what you are descibing:
"Hey, Fighter Bob, can you move? I wanna cast burning hands"
"Sure, Wizard Joan" (takes 5' step to an open spot after Joan enters their space but before Joan counts as having 'stopped moving')
Note, however, that Joan couldn't subsequently yield their space to another character in the same round, having already moved, nor could Bob, having already taken a 5' step, without a particularly lenient GM.
Also off-turn free-actions can be a problem in that they can be used by certain builds to do crazy stuff that might be described as breaking the game. But 3.5 isn't exactly a perfectly balanced game anyways and if it's working for your group currently I wouldn't worry about it.