Sure it's possible. But you need some way for both parties to authenticate the link between Avatar and Paypal account. Which incoming payment come from the AV renting which parcel? Are you paying your money to the right place? There are known in-world frauds which depend on an AV pretending to have the authority to accept payments, but such crooks can be traced by Linden Labs. Move the transactions out of the L$ system, and you lose any protection.
(But the TOS seems to disclaim responsibility for everything, so...)